- Nike has been hit with a class action lawsuit alleging that its RTFKT NFTs were unregistered securities
- The lawsuit claims Nike orchestrated a “rug pull” by shutting down RTFKT, decimating the NFTs’ value
- Plaintiff Jagdeep Cheema argues that he was misled by Nike’s marketing, relying on promises of future rewards and value growth
Nike has been hit with a class action lawsuit accusing the company of promoting and selling unregistered securities in the form of NFTs, then abruptly shutting down its subsidiary RTFKT and leaving investors with worthless assets. Lead plaintiff Jagdeep Cheema alleges that Nike’s marketing efforts inflated the value of the NFTs, only to pull support without warning. The complaint seeks damages for investors who claim they were misled into buying the NFTs under false pretenses.
Was RTFKT Plug-pull Also a Rug-pull?
Jagdeep Cheema filed the lawsuit Friday in the Eastern District of New York, claiming that the company’s venture into NFTs resulted in significant investor losses. According to the complaint, filed by The Rosen Law Firm, Nike’s subsidiary RTFKT sold Nike-branded NFTs without registering them as securities, and later pulled support for the project, causing the NFTs’ value to crash.
Cheema alleges that the NFTs were marketed as part of a gamified ecosystem promising rewards like limited-edition physical Nike products:
Plaintiff and others would never have purchased the Nike NFTs… had they known that the Nike NFTs were unregistered securities or that Nike would cause the rug to be pulled out from under them.
The filing accuses Nike of exploiting its brand to generate hype around the NFTs and profiting from both primary and secondary sales. Investors relied on Nike’s continuous marketing to maintain the value of their NFTs, a reliance that, the plaintiff argues, satisfies the test for classifying the NFTs as securities under federal law.
Nike FCKD Up RTFKT
In December 2021, Nike acquired RTFKT, a digital studio specializing in NFTs and virtual goods, hoping to capitalize on the booming crypto market. RTFKT launched projects like the “Nike Cryptokicks,” which initially fetched thousands of dollars in secondary markets. Nike took a cut from these secondary sales, further incentivizing the promotion of the NFTs, according to the complaint.
However, in December 2024, RTFKT announced it was “winding down operations,” blindsiding investors, with the complaint describing the announcement as a classic “rug pull” which “decimated” the NFTs’ valuations. “The reason that so many had purchased the Nike NFTs – to complete quests to gain access to additional NFTs or physical Nike products – evaporated instantly,” the filing says.
The lawsuit seeks damages under federal and state consumer protection laws, citing deceptive business practices and the sale of unregistered securities. Nike has not yet publicly responded to the filing.
