this little Piggy market went south

The minters (developers and creators) took in about 30,000 sol or $US6 million on the day. They will also earn a 5 per cent royalty, via a smart contract built into the NFT, with every resale. All of this is pretty standard, apparently.

Now, the minters are expected to do something useful with those proceeds to support the future value of these NFTs, such as create a mobile phone game, tokens, or promise to return royalties in the future.

The whole hog

It’s vague, but the premise is to maintain interest and value in assets that really are nothing but stylised pictures.

The Piggy Sol Gang, however, had a compelling pitch.

They would build a digital marketplace for NFTs called Alpha Art. The holders of the original Piggy Sol Gang-issued piggies would then receive 30 per cent of all the fees from this marketplace in which these NFTs would trade.

“You sir might as well retire of passive income already,” said the Piggy Sol Twitter account, as if passive income is an affliction.

The sillier things get, the richer the holders of the piggies would get, as marketplace activity booms. This was great news: the price of the piggies traded up to 25 sol valuing the venture around $US165 million ($220 million). The signs were that this would only get sillier.

The question holders are asking is whether they’ve been cheated in the new or old world sense?

Except they didn’t. Sadly, they got serious.

The team at Piggy Sol – being Piggy Bank, Piggy Capone and Pigasso – regretfully informed holders they would not get a share of marketplace royalties from Alpha Art.

They blamed the suits. UK banking and terrorism laws would not allow them to pay individuals without KYC (know your customer) checks.

As an alternative, they proposed a DAO (decentralised autonomous organisation), or club, that would allow the 10,000 holders to vote on what to do. This was a setback but not a total collapse, as holders would no doubt vote to restore the royalty arrangement. The floor price settled at 14 sol (the floor price is the cheapest settled price of an NFT set, given they are all unique).

The developers then said the DAO wouldn’t work because the NFTs were unregistered securities, and royalty payments would violate securities law. That triggered a collapse to 2 sol, a near $150 million evaporation of value if we’re referencing fiat nonsense.

The PR pig

The squealing pigs fired off questions to Bernard, the public relations lead, a green pig with a yellow hat and a red earing who was there to help.

“No [one] has clicked the buy button for you,” he replied in the chatroom. “Go buy in a stock and the company makes a bad or hard decision And ask them for a refund.”

The question holders are asking is whether they’ve been cheated in the new or old world sense? Some have formed the view that Piggy Sol “management” may have crossed the line and engaged in securities fraud.

They apply the Howey Test of the US Supreme Court to determine whether a transaction qualifies as an investment contract, and therefore is subject to rules that govern marketed securities.

Under the Howey Test, an investment contract exists if there is an “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others”.

Holders argue the expectation of profits arising through multiple public announcements of the revenue share may indeed have given the NFTs status as securities.

Inducing investment into piggy NFTs, which the developers profited from via their own resale royalties on a large increase in secondary market volumes, may therefore arguably meet a textbook definition of securities fraud.

But attempting to describe a multimillion-dollar stoush involving the sale of digital piggy images as “textbook” once again has me channelling Mr Blunden.

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