I’ve written before about the massively inflated prices of retro video games in recent years. Some of it can be chalked up to nostalgia, the rising prevalence of the hobby and the ever-dwindling supply of games in good condition, but a recent lawsuit alleges that two companies – Heritage Auctions and grading firm Wata Games – have been conspiring together to manipulate prices to turn greater and greater profits.
Wata operates a fairly straightforward service where retro game collectors can ship their games in to be graded and encased in a protective hard-shell plastic for display purposes. Wata charges customers based on the game’s market value – for example, a game valued at $10,000 costs $400 to be graded.
The class-action lawsuit was filed May 10 in California by plaintiffs and class members across the U.S. who paid for the grading and encapsulation services of Wata. The number of class members is estimated to exceed 10,000 individuals based on the company’s average submission figures.
The plaintiffs accuse Wata of “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 alleges that Wata’s own employees have been actively selling their own graded games at high prices, breaching its own policies on fraud and conflicts of interest. It also alleges that many customers have had to wait months for their games to be returned despite Wata touting turnaround times as low as 15 business days.
This wouldn’t be nearly as concerning if it weren’t also for the allegation that Wata moved its headquarters from Colorado to California in September without gaining permission from collectors to physically move their games. They’re insured, but that’s not much comfort in such a volatile collector’s market.
Wata President and CEO Deniz Kahn and Heritage Auctions co-founder Jim Halperin are the primary alleged co-conspirators, purportedly manipulating the market through news releases and interviews saying the value of retro games would continue rising. Halperin was once listed as an advisor on Wata’s website.
Whatever they’re doing, it’s working in their favor. Before Wata’s inception, the highest price ever paid for a video game was a pristine copy of Super Mario Bros., which sold on eBay for around $30,000 in 2017. The same title, graded by Wata, sold for just over $100,000 in 2019 – it was allegedly co-purchased by Halperin, an unnamed man and Richard Lecce, who later made an appearance on “Pawn Stars.”
During the course of the episode, the pawn shop proprietor brought Kahn on the show as a consulting expert. Lecce and Kahn pretended not to know each other, and Kahn went on to value the game at more than $300,000 just nine months after the $100,000 sale. Obviously, the deal fell through, but “the visibility and alleged value of the game had been successfully inflated to the public,” according to lawsuit docs.
It worked. In April 2020, another graded copy of Super Mario Bros. was purchased by investment company Rally for $140,000. It was later sold in August for $2 million to an unnamed buyer, setting a new record by leaps and bounds.
All games sold via Heritage Auctions grant the company a 20% buyer premium. Between that and Wata’s sliding-scale grading cost based on a game’s value, it doesn’t take a genius to suspect intentional market manipulation might be at play.
I’ve always believed that Wata’s business was a bit of a racket. I understand that some people like collector’s items, but what’s preventing them from encasing things on their own? Surely hobbyists can see for themselves whether an item is in good condition – why does it have to be graded by some self-appointed authority?
Despite my personal vendetta, I never suspected that Wata could be part of an elaborate scam. Having only heard rumors before, the lawsuit’s accusations are surprisingly specific. Still, there are two sides to every story – it’ll be interesting to see how it plays out in court.
At the very least, I hope that Wata’s customers who have been waiting for months on end for their valuable games to be returned are compensated appropriately.
Riordan Zentler can be reached at firstname.lastname@example.org.
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