Former Nike CEO John Donahoe continues to build on his negative legacy at the athletic footwear and sportswear behemoth as the company is now being sued by purchasers of NFTs (non-funglible tokens) that originated with Nike’s December 2021 acquisition of RTFKT (pronounced “artifact”), a virtual sneaker design company and studio for NFTs.
Reuters was the first to report on a suit filed by purchasers of Nike-themed NFTs and other cryptocurrency assets who said they suffered significant losses when the athletic wear company abruptly closed the business that created those assets.
“In a proposed class action filed in Brooklyn, New York federal court, purchasers led by Australian resident Jagdeep Cheema said the sudden closure in December of Nike’s RTFKT unit caused demand for their NFTs to dry up,” Reuters wrote. At issue, in part, is the company projecting that the innovation RTFKT represented would live on through the “countless creators and projects” it inspired.
RTFKT announced on X (fka Twitter) in December 2024 that it planned to wind down operations by January 2025, noting it would release one final collection, Blade Drop. The company labeled the announcements “a new chapter for RTFKT” and stated it would launch an updated website showcasing “the groundbreaking work that defined” the company’s journey.
The proposed class action suit claims the move “decimated” investors when “prices plunged and did not recover,” and also removed any chance to take part in the challenges and quests, which the group argued was a primary reason for purchasing the tokens.
Friday’s lawsuit sought unspecified damages of more than $5 million for alleged violations of New York, California, Florida and Oregon consumer protection laws, according to Reuters reporting.
The suit claimed the NFTs were unregistered securities, as Nike sold them without registering with the SEC and accused the company of using “its iconic brand and marketing prowess to hype, promote, and prop up the unregistered securities that RTFKT sold.”
“Because the Nike NFTs derived their value from the success of a given promoter and project — here, Nike and its marketing efforts — investors purchased this digital asset with the hope that its value would increase in the future as the project grows in popularity based on the Nike brand,” the lawsuit argued.
In December 2021, when Nike acquired RTFKT for an undisclosed sum (believed to be in the $1 billion range), Donahoe, then the CEO of Nike, said, “This acquisition is another step that accelerates Nike’s digital transformation and allows us to serve athletes and creators at the intersection of sport, creativity, gaming and culture.”
In May 2021, the London-based startup raised an $8 million seed round led by Andreessen Horowitz at a valuation of $33.3 million.
Formed in 2020 by Benoit Pagotto, Chris Le and Steven Vasilev, RTFKT created digital products, including sneakers, and used blockchain technology to ensure authenticity.
Launched in January 2020 and only moving to monetize the business ten months later, RTFKT was said to have made millions selling virtual sneakers before the Andreessen Horowitz investment and the Nike acquisition.
Nike said at the time that it first began thinking about NFTs in 2019 when it secured a patent for blockchain-compatible sneakers known as “CryptoKicks.” Under the patent, once purchased by a registered seller, the buyer receives a corresponding NFT that uses blockchain technology to verify authenticity and ownership. If the shoes are subsequently sold or traded, the digital token follows.
According to Cybernews, the NFT market has struggled this year.
According to multiple sources, one major NFT marketplace, Kraken closed its marketplace to shift resources toward new products and services. The NFT marketplace will transitioned to withdrawal-only mode on November 27, 2024, and was fully closed over a three-month period. Users on that marketplace had until February 27, 2025, to withdraw their NFTs.
Cointelegraph is reporting that the overall NFT market dropped sharply in the first quarter of 2025, with sales plunging 63 percent year-over-year, to $1.5 billion in total sales in Q1 2025, down from $4.1 billion during the Q1 period in 2024.
Image courtesy RTFKT/Nike, Inc.
