Lawsuit filed against Game of Silks and founders for class-action suit – Horse Racing Nation

A legal battle has ensued as a Game of Silks player initiates a class-action lawsuit against the company and its founders, alleging a breach of federal securities laws. Gary Cantner, a Florida resident, lodged the suit on behalf of himself and others who acquired non-fungible tokens representing racehorses in the Game of Silks virtual game.

Apart from the company, the lawsuit’s defendants include co-founder and vice president Troy Levy, his company (Tropical Racing), Dan Nissanoff (CEO and co-founder), Ron Luniewski (chief operating officer), and Derek Cribbs (CFO). Levy refrained from commenting on the matter.

Game of Silks aimed to mirror the real-world horse racing industry on a virtual platform, enabling players to take on various roles akin to those within the actual sport. By utilizing different NFTs, participants could assume the positions of horse owners, stable managers, landowners, and syndicate members, with NFT purchasers standing to profit when their corresponding real-life horses achieved victories.

The initiative kicked off with the sale of silks avatars in 2022, and horse NFTs became available in October of the same year. As per the lawsuit, each Silks Horse NFT was linked to a physical thoroughbred racehorse, with owners being promised escalating rewards based on the horse’s performance over time.

March 2024 witnessed the launch of Season 2 silks horse NFT sales within Game of Silks, initially priced at $1,250 but later reduced to $875, as per the lawsuit’s disclosures.

According to the lawsuit, the defendants cultivated a community of investors keen on owning virtual racing horses to drive Game of Silks NFT sales, generate funds for the company’s development, and facilitate a secondary market for the NFTs. The lawsuit outlined various examples of how investors could yield profits.

While Game of Silks formed partnerships with entities like the New York Racing Association, NYRA Bets, The Jockey Club, and Fox Sports’ America’s Day at the Races, none of these entities were implicated in the lawsuit.

The lawsuit highlighted that the market for Silks horse NFTs experienced a freeze in July 2024, leading to a substantial drop in the value of Season 2 Silks horses NFTs on the secondary market. Defendants allegedly ceased payments on the winnings of Season 1 Silks horses NFTs by July 2024, despite the horses securing victories and prizes in the real-world races.

Furthermore, the lawsuit contended that despite the game’s governance purportedly being decentralized, the leadership team centralized decision-making and concealed essential financial information from the community.

The legal document asserted that the sale of these crypto assets constituted investment contracts, rendering them securities under federal law. However, it noted that no registration statement had ever been in effect or filed to register the securities with the U.S. Securities and Exchange Commission.

The lawsuit maintained that the defendants disseminated falsified statements, omitted material facts, and engaged in misleading practices regarding the securities. As a result, the plaintiff and class members are entitled to restitution for money, assets, and benefits acquired unjustly by the defendants.

The lawsuit seeks a jury trial and demands damages of an amount to be proven during the trial, along with associated fees, costs, and interest.