Cryptocurrency Collective Files Trade Confidential Lawsuit to Protect Interest in Wu-Tang Clan Album | Seyfarth Shaw LLP

The new owners of a single copy of Wu-Tang Clan’s “Once Upon a Time in Shaolin,” once a cryptocurrency foundation in New York’s Eastern District, have filed a lawsuit against the album’s former buyer, Martin Shkreli, accusing him of being the first to be released. Wrongfully retaining copies of album data for the purpose of public release. The dispute turned out to be contentious, and the Court is now preparing to weigh a motion for contempt of Shkreli.

The plaintiff, PleasrDAO, is a crypto foundation focused on digital art. Defendant Shkreli is a former pharmaceutical executive who made headlines after inflating the price of an anti-parasite drug and being sentenced to an unrelated seven-year prison sentence for securities fraud.

“Once Upon a Time” is Wu-Tang’s seventh studio album. Only one copy was made, consisting of thirty-one songs on two CDs stored in a jeweled silver case with leather-bound sheet music, customized audio speakers, and a gold-leaf certificate of authenticity. Wu-Tang’s RZA and producer Cilvaringz deliberately tried to treat the album like fine art, giving it an exclusive value. As a result, it was secretly recorded, stored in a vault, and subject to various intellectual property protections.

Shkreli purchased “Once Upon a Time” in 2015 for $2,000,000, making the album the most expensive piece of music ever sold. Consistent with Wu-Tang’s intentions for the album, Shkreli’s purchase agreement prohibited the album from being duplicated or released to the public until 2103.

Shkreli faced a forfeiture order of $7,360,450 following his sentencing for fraud in 2018. To satisfy the judgment amount, he was ordered to give up his shares in valuable assets, including “Once Upon a Time.” The order also prohibited Shkreli from taking any action that would reduce the value or marketability of the assets.

PleasrDAO paid the equivalent of $4,750,000 to become the new owner of the album from 2021 to 2024.

In 2022, Shkreli was released early from federal prison to begin a three-year period of supervised release, requiring him to comply with a forfeiture order. However, just a month after being released from prison, he played the album during a livestream on social media and admitted to keeping copies of the album, saying: “I’m not stupid. “I don’t buy something for two million dollars just to have a copy.” Shkreli also mocked PleasrDAO by posting numerous posts on X (formerly Twitter); one of them read: “@pleasrdao blocked me from his account, so I guess I’ll be playing the album in areas from now on.” Shkreli later hosted a “Spaces” session on his X account and streamed the album live to approximately 5,000 listeners.

The complaint aims to enforce the confiscation order and accuses Shkreli of misappropriation of trade secrets, tortious interference with prospective economic advantage, and unjust enrichment. From the start, Shkreli faced litigation losses; PleasrDAO successfully filed for a temporary restraining order and later injunctive relief. The injunction order, dated August 26, 2024, includes an affidavit stating that Shkreli delivered copies of the album to his attorneys, as well as an inventory of stored copies, contact information of people to whom Shkreli distributed the data, and an accounting of Shkreli’s proceeds from distribution or theft of the album.

Shkreli filed a declaration of purported contempt in late August, but shortly thereafter PleasrDAO argued that Shkreli’s application was insufficient and requested that the Court use its contempt powers to intervene. PleasrDAO specifically highlighted Shkreli’s acknowledgment that additional copies “may” be in storage, his statement that he only delivered audio files in a specific format, and his statement that he turned over “15 tracks” to his lawyers. When the album contains 31 tracks. The court ordered Shkreli to submit a supplemental affidavit explaining the disparity in track counts and scheduled a hearing “to address the deficiencies in Defendant Shkreli’s statements.”

The court will hear the parties’ arguments on November 20, 2024. Given the history of the case so far, the odds do not appear to be in Shkreli’s favor. In fact, he might be annoyed by Shkreli’s failure to draft a compliance statement with surgical precision, especially given his ramblings about the album’s secrecy. As it progresses, the case will reveal an informative example of a trade secret dispute in which the defendant admits at least partial wrongdoing. Fortunately for Shkreli, the lawsuit is temporary, even if Wu-Tang lasts forever.