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Wata Games Lawsuit Filed in California Over Alleged Deceptive Activities

May 11, 2022

By: Ryan Easby

 
 

A Wata Games lawsuit has been filed, as collectors are seeking to bring the grading company to court following delays, and various accusations of price manipulation, false advertising and more. These allegations cite RICO (racketeering), Unfair Competition Law, False Advertising, Intentional Misrepresentation, and more as the company explains in a brief summary of the case:

"This case involves video game grading company Wata, Inc. and its parent company, Collector's Universe, inc., engaging in affirmative acts to manipulate the retro video game market, engaging in unfair business practices, engaging in false advertising, making false statements about the turnaround times for grading services and failing to disclose material delays to customers."

The lawsuit follows allegations made last year, and restates many of them in the filing. These include that Wata Games President and CEO Deniz Kahn has been colluding with the co-founder of Heritage Auctions, Jim Halperin, in order to manipulate the retro games market through positive press and questionable ratings. Highlighted among them is that Heritage Auctions co-founder Jim Halperin was an advisory board member for WATA Games, as well as an investor, before allegedly divesting his ownership in 2021 when the company was sold. Other accusations include WATA staff getting their own games graded with the company and selling them, and reports of a number of potential conflicts of interest.

 

Following these disclosures, the prices for the games that Wata and Heritage Auctions were selling started falling. On July 11th 2021, prior to the allegations being released, a copy of Super Mario 64 graded by Wata as 9.8 A++ sold for $1.56 million dollars through Heritage Auctions. After the allegations, a copy of the same game graded at 9.6 A++ sold for $102,000 through the same website on October 29th 2021. Much later on April 22nd 2022, a copy of said game at the same grading level sold for $57,600.

The proposed class-action lawsuit seeks to include all U.S based individuals who made purchases from Wata Games from May 10th, 2019, a class that the plaintiffs think may well exceed 10, 000 individuals. They are basing that on the fact that in Wata's population report of Nintendo Entertainment System games, over 9,000 games were reported, and even with average ownership of two graded games each that would be over 4,500 class members. Given this is only one system out of a multitude the number of plaintiffs estimated seems reasonable.

 
 

It's worth noting that several questions of law and fact have been raised in the lawsuit, with the lawsuit itself stating that these include

"(a) Whether Wata and CU engaged in a course of conduct designed to artificially inflate the retro video game market in order to enhance their own profits;

(b) Whether Wata and CU's conduct actually inflated the retro video game market;

(c) Whether Wata and CU charged customers for grading services based on artificially high market prices;

(d) Whether Wata and CU falsely advertised unrealistic turnaround times to the public;

(e) Whether Wata and CU charged consumers for expedited services knowing that paying for expedited services would not ensure the consumer received their games in a timely manner;

(f) Whether Wata and CU became aware that their turnaround times were unattainable yet still failed to disclose the true turnaround times to consumers; and

(g) Whether Wata and CU failed to correct their own misstatements to customers."

Graded Super Mario 64

 
 

These questions of law and fact break down to the people involved in the lawsuit looking to confirm whether or not Wata Games and CU were involved in a case of fraud so that they could make more money off their own sales. They allege that not only did Wata Games and CU lie to the general public, but they also were pumping up their own market prices in order to gain a much higher profit than they previously would have seen.

There are three named plaintiffs listed in the lawsuit: Jacob Knight, a video game collector from California; Jack Cribbs, a video game collector from Michigan; and  Jason Dohse, a video game collector from Iowa. All three allege that Wata Games took far longer than they listed to deliver the games that each plaintiff had ordered. In the case of Jacob Knight the games took almost two full years to reach him after his order, a year longer than expected. Each of the plaintiffs has their own story on the length that Wata Games took to deliver on their service, which also means that there's likely a much larger group of people affected by this. You can find the lengths that it took for each plaintiff to receive their items below.

"On March 3, 2022, almost a year after he expected to receive his games back, Knight received notice that his games had finally shipped. In all, nearly twenty-one (21) months passed from the time of order until the time that Knight received his graded games."

"Cribbs ordered a video game grading service that was supposed to take fifteen (15) business days. In total, seven (7) months elapsed, or one hundred forty-five (145) business days before Cribbs received his games."

"Dohse paid for grading services in forty-five (45) business days but Wata took seventy-six (76) business days to provide the service bargained for and then only returned the games after Dohse sent frustrated e-mails."

The plaintiffs are seeking monetary damages in the form of a refund that measures up to the difference between the price paid for services and the value of services received. Plaintiffs are also seeking public injunctive relief to end Wata Games' alleged deceptive business practices and prevent them from making false statements in the future. For now, we await the response from Wata Games/Collector's Universe for the next step in filing their defense, and early steps likely include needing to survive a motion to dismiss, and attempting to certify the class.