Games ratings company Wata Games is the target of a new US class action lawsuit alleging it has engaged in unfair business practices and manipulated the retro gaming market for its own benefit.
As reported by VGC, the lawsuit was filed May 10 in the Central District of California and represents class members (estimated to number up to 10,000 people) who all paid for game ratings and other services provided by Wata. It accuses Wata of “being involved in positive acts to manipulate the retro video game market” and “being involved in unfair business practices,” with the number specifically citing Wata’s President and CEO, Deniz Kahn.
Kahn is accused of working with auction house Heritage Auctions co-founder Jim Halperin – a former Wata investor and advisory board member – to manipulate the retro games market through advertising and media interviews, in which the pair allegedly claimed that it was retro games there prices would continue to rise.
Remarkably, Wata and Heritage Auctions have been associated with a number of stunning vintage game sales in recent years. A pristine sealed copy of Super Mario 64, appraised by Wata and auctioned by Heritage, sold for $1.56 million last July, and just weeks later, a copy of Super Mario Bros managed by both companies, sold for a record-breaking $2 million.
Prior to Wata’s entry into the market in 2018, the previous record was held by a copy of Super Mario Bros., which sold for around $30,000 in 2017, according to the newly filed court documents. However, just a year after Wata’s inception, another copy of Super Mario Bros. – graded by Wata and sold by Heritage Auctions – sold for $100,150. The lawsuit alleges that Heritage Auctions’ Jim Halperin bought the game along with two other men.
The lawsuit also highlights that Wata and Heritage both benefit financially from the grading and sale of games, meaning they will benefit significantly from any increase in market prices. Wata, for example, calculates a percentage of a game’s market value when ranking – according to VGC, it would make over $20,000 from a $1 million game – while Heritage calculates a buyer’s premium of 20% and deducts 5% from the seller.
“Heritage auctions benefited by earning more commissions from sellers and buyers,” the court documents said. “Halperin benefited from the increase in value of his game. Wata benefited from the increased awareness and demand for appraisal services.
“Also, the increased value of the games allowed Wata to charge even more for its grading services as prices were tied to values. However, the relationship between Wata and Heritage Auctions was still unknown to collectors.
“Meanwhile, video game collectors rushed to send their own sealed games to Wata for evaluation, believing they could sell the games for a profit if the market surged.
“Unknowingly for collectors, Wata was massively stalled by the onslaught. Nevertheless, the company advertised incorrect and overly optimistic processing times on its website. Customers were not informed of the delays ahead of their purchases. Wata continued to take orders and payments from customers. ”
Elsewhere, the lawsuit also resurfaces allegations that Wata employees sold Wata-rated games in violation of the company’s own fraud and industry policies — an allegation made against Wata chief adviser Mark Haspel last year.