NFTs lack the same level of clout they had a few years ago, and the fallout from the mainstream boom—and bust—of the NFT market continues to plague some brands that got in on the action. The ranks of companies under scrutiny for their NFT strategy grew this month to include Dolce & Gabbana.
The luxury fashion brand has been named the defendant in a class-action lawsuit alleging that, when it sold NFTs, it made promises it did not deliver on. The complaint also names UNXD, an NFT marketplace that allegedly facilitated Dolce & Gabbana’s NFT drops and transactions, as a defendant.
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The lead plaintiff, Luke Brown, filed the case in New York’s Southern District Court earlier this month, claiming he purchased Dolce & Gabbana NFTs, called DGFamily. According to the complaint, Brown spent $6,000 on DGFamily assets under the pretense that “purchasers would later receive benefits, including, among other things, digital rewards, physical products and exclusive access to events.”
But per Brown and his counsel, he never received most of the benefits Dolce & Gabbana promised—and the delivery of the NFTs was delayed.
According to the complaint, “[Dolce & Gabbana] never provided a complete set of products [Brown] secured through his purchases of digital assets, despite repeatedly promising him the products would be delivered, while inevitably continuing to push back the delivery date.”
According to court documents, the release of the NFTs was delayed because the products had not been accepted onto the UNXD marketplace, which the companies did not disclose to investors at the time. In June 2022, the companies announced the first of eight benefits investors were due to receive, Brown claims.
“The first drop…consisted of digital outfits that could be used only in a metaverse platform with barely any users, called Decentraland,” the complaint states.
One complaint metaverse users have long held is that the platforms do not support transferability of digital assets—so, for instance, if a user has a digital asset in Decentraland, they cannot then transfer that asset over to Roblox, another metaverse platform. That seems to be a complaint among DGFamily investors, per Brown’s complaint. Brown further alleges that Dolce & Gabbana and UNXD failed to obtain the proper permissions from Decentraland management before releasing their drops, which caused a delay for investors interested in using the digital products.
A later drop, which the complaint says the companies called “Realtà Parallela collection,” was set to ship real-life products to investors, Brown contends; but, according to the complaint, many investors never received their packages, and those who did were slapped with customs and duties fees.
Brown contended he lost $5,800—nearly 97 percent of his purported original investment—because the value of the DGFamily NFTs depreciated so quickly. The class action he has started accuses Dolce & Gabbana and UNXD of fraud, breach of contract, negligence and more.
The complaint alleges that Dolce & Gabbana “manipulated the digital currency market for DGFamily Products to their advantage by executing a ‘rug pull.’”
In the type of transaction Brown discusses throughout the case, a rug pull typically refers to a company profiting off of consumers’ cryptocurrency investments by axing a project after the currency has come in, but without delivering the so-called benefits an NFT had been marketed as allowing access to.
And Brown believes that, in this case, the Dolce & Gabbana and UNXD did just that, saying that the companies have made the choice to “abandon” the project almost entirely.
“On information and belief, defendants made the business decision to forgo an expensive and time-consuming process to complete the DGFamily project or support it, and instead deliberately undertook a scheme to defraud [Brown] and other consumers,” the complaint alleges, going on to say that the companies’ “standard operating procedure has been to promise products they fail to deliver, before abandoning a project and community they promised to support.”
This case is far from Dolce & Gabbana’s only questionable business practice, as far as consumers are concerned. In 2018, the brand faced heavy scrutiny for what many called a racist advertisements in its Chinese market, which was only exacerbated by screenshots of Instagram direct messages with further derogatory comments about China, which allegedly came from Stefano Gabbana, the company’s co-founder.
Even prior to that, the company had left an unsavory taste in consumers’ mouths, calling one of its products “the Slave Sandal” in 2016, according to New York Magazine, and, in 2012, sending white models down the runway with earrings reminiscent of Blackamoor statues, which, per the Guardian, “became an image that romanticized slavery and plantation life.”
Neither Dolce & Gabbana nor Brown’s counsel responded to Sourcing Journal’s request for comment on the case.