FTX Bought 101 Bored Apes at the Record-Breaking Sotheby's Auction. Securities Fraud Alert?
FTX Bought 101 Bored Apes at the Record-Breaking Sotheby's Auction. Securities Fraud Alert?
What does FTX’s big bet on the Bored Ape Yacht Club expose about the realities of Yuga Labs and the NFT market?
On the morning September 9th, 2021, the Bored Ape Yacht Club shattered records.
The prestigious fine art broker Sotheby’s closed an auction for 101 Bored Ape NFTs with a bid of $24.4 million.
The sale exceeded the upper limit of Sotheby’s initial estimate of $18 million. The buyer paid over $240k per Ape NFT.
The identities of those who helped the Yacht Club and their creator Yuga Labs break the record — the buyer of $24 million in cartoon apes — remained a mystery.
Who was involved in the transaction? How did Sotheby’s come into possession of the 101 Apes?
Many articles were written about the sale, but the press did not appear interested in asking these questions about the nature of the sale.
In reporting the sale, most publications failed to even note that the buyer was unidentified.
While private art buyers are known to request anonymity, it’s glaringly obvious that the collection was not purchased for the purposes of fine art, but as instruments attached to financial markets.
So, who bought the Apes?
As it turns out: FTX was the winner of Sotheby’s 101 Bored Apes.
FTX, the now bankrupt cryptocurrency exchange and hedge fund, very quietly “aped in” to the tune of $24.4 million.
As far as I can discern, FTX’s Bored Ape bonanza at Sotheby’s has never been publicly acknowledged by Yuga Labs’ founders, executives, PR team, or Sotheby’s representatives. At the very best, FTX’s role in the Sotheby’s auction was heavily downplayed as to be practically invisible to mainstream perception.
How do we know that FTX was responsible for purchasing the Apes?
On-chain evidence includes:
Sotheby’s transferred the 101 Apes to the FTX-owned wallet on September 22, 2021 to this wallet: 0xf8e0C93Fd48B4C34A4194d3AF436b13032E641F3
The receiving wallet previously sent 13 ETH to a “Blockfolio”/FTX US exchange in April of 2020 — prior to the launch of FTX US in May of 2020. This form of interaction often indicates a relationship between this wallet and the exchange, as one researcher highlighted
When the Apes were sold on the FTX US NFT exchange, they first needed to be transferred to a deposit wallet because FTX’s NFT marketplace required custodial deposit (extremely troubling in retrospect)
Frequent and large transactions involve FTX/Alameda wallets, including millions in Yuga’s ApeCoin claimed from the Apes that was later sent to an Alameda wallet (and appears to have disappeared into FTX’s centralized exchange)
However, even if the above interpretations of the transactions are incorrect, off-chain evidence confirms that FTX won and received the 101 Bored Apes:
On December 1, 2021, FTX tweeted a video promoting their new NFT marketplace. All of the Apes in the video were included in the Sotheby’s auction less than two months prior. Ape 5812 and Ape 3432 make an appearance, for example. Apes 5812 and 3432 remain in FTX’s wallets to this day.
Screenshots of FTX’s NFT marketplace with the Apes from the Sotheby’s sale include exclusively Apes from the Sotheby’s auction. These Apes were priced aggressively enough to nearly provide arbitrage with other marketplaces.
Franklin, arguably the most important market maker for the Bored Apes, identified the contract at the time on Twitter, confirming that FTX likely purchased the Sotheby’s lot: “That's what I am thinking - the 101 apes are viewable on the [FTX US NFT] exchange … some were listed and bought for under ape floor by myself, @punk9059, @zymerce, @howlshot, etc. to arb.”
I confirmed with Franklin that he purchased Ape 5211 (included in Sotheby’s sale) in this transaction from the FTX US NFT Marketplace.
@themonarch00 @hotlneblng_ @traviioso @ChristiesInc That's what I am thinking - the 101 apes are viewable on the @FTX_US @FTX_NFTs exchange at ftx.us/nfts/collectio… and some were listed and bought for under ape floor by myself, @punk9059, @zymerce, @howlshot, etc. to arb. They now have like 79 apes left (etherscan.io/token/0xbc4ca0…)Sotheby’s permits corporate entities to place bids. FTX provided its services to facilitate bids at Sotheby’s. For example, FTX supported Constitution DAO, which famously sought and failed to purchase a first printing of the Constitution. With the support of FTX US president Brett Harrison, the DAO worked in partnership with FTX US to meet Sotheby’s KYC requirements.
A November 2022 Coindesk article (“FTX Blowup Puts Trove of Prized Bored Apes at Risk of Liquidation”) confirms the record: “A representative of the firm says that FTX's financial sibling Alameda Research is in charge of the wallet, and has previously traded Bored Apes as part of its NFT trading strategy.” However, the article neglects to explain that FTX purchased the Apes from the Sotheby’s auction.
January 26, 2023 update: Twitter user RΞDPIG thanked both Sotheby’s and FTX’s account on this tweet from December 2021. “Welcome home BAYC#5614,” reads the tweet. Ape 5614 was sold via Sotheby’s 101 Bored Apes auction. The tweet was deleted.
DrJones0305 on Twitter is the first person I saw analyze the FTX wallets and make the explicit connection between the on-chain activity and the Sotheby’s sale. FTX’s wallets remain in possession of many Ethereum and Solana assets.
According to their estimate, the collective value of FTX’s Ethereum collection is roughly $8.5 million. Considering the FTX collection holds some of the rarest Apes along with a small bounce in crypto markets, I suspect the true value of their collection could presently fetch well north of $10 million. There are 3 gold Apes, for instance, which still sell on marketplaces for about $1 million each.
Securities fraud alert?
Over the next few pieces in this series, I’ll explore some of the events, individuals, coverage, and questionable elements of the Sotheby’s auction — as well as Yuga’s intricate involvement with FTX.
These stories raise hard questions about what went down with the NFT market over the past couple years.
At the conclusion, I’ll ask one important question: do the actions taken by Yuga Labs and their business associates around the Sotheby’s auction constitute market manipulation and insider trading?