While the world of Web3 and blockchain is a decentralised one, it is not a lawless one, says Withers KhattarWong lead lawyer Shaun Leong in response to the High Court’s issuance of its grounds for judgement on the barring of sale and transfer of a Bored Ape Yacht Club (BAYC) non-fungible token (NFT).
On May 13, the Singapore court granted a proprietary injunction to bar the sale and ownership transfer of a BAYC NFT on behalf of a Singaporean investor Janesh Rajkumar against a defendant under the pseudonym “chefpierre.eth”. Leong is the claimant’s legal counsel.
In court documents issued on Oct 21, High Court judge Lee Seiu Kin says while the decentralised nature of blockchains may pose difficulties when it comes to establishing jurisdiction, there had to be a court which had the jurisdiction to hear the dispute.
“In the present case, based on the available facts before me, that court was the Singapore court. The primary connecting factor was the fact that the claimant was located in Singapore, and carried on his business here,” he adds.
The court also held that if the Singapore courts did not hear the case, there was no other appropriate forum. This was because the NFT existed as code stored on the Ethereum blockchain, which is essentially a decentralised network of ledgers maintained in computers around the world. “The rule of law prevails,” says Leong.
He stresses that NFTs are not merely information or code on the blockchain, but also have the attributes of property. “Ultimately, the court found that our client's NFT was worth protecting and issued a worldwide proprietary injunction to protect the NFT,” says Leong.
See also: Digital Assets Association launches to connect tradfi and tokenised real world assets
According to court documents, Janesh acquired the NFT on Aug 6 for 15.99 ETH ($29,407). He was a regular user on NFTfi, a community platform functioning as an NFT-collateralised crypto lending market.
Janesh would often enter into loan transactions with other users to borrow cryptocurrencies with NFTs as collateral — one of them being a BAYC NFT which allowed him to obtain larger sums of loans due to its rarity and high value.
For every loan transaction, Janesh’s agreement would include not allowing the lender to obtain ownership nor any right to sell or dispose of the BAYC NFT. The lender could only hold on to the NFT, pending the repayment of the loan.
See also: Ex-Grab executive joins Winklevoss twins crypto firm Gemini as head of APAC
After numerous successful loans using the BAYC NFT, including one with chefpierre.eth, Janesh entered another loan agreement with the defendant on March 19. The loan for 150,000 DAI was subject to the claimant’s usual terms.
On April 17, Janesh asked chefpierre.eth for a short extension of time to repay the loan, which the latter agreed to. However, after a new agreement fell through, chefpierre.eth changed his mind, exercising a foreclosure which resulted in the NFT transfer from the platform’s escrow account into his crypto wallet.
Janesh then discovered that chefpierre.eth had listed the Bored Ape NFT for sale on marketplace OpenSea, with a number of offers. The claimant therefore filed a suit against the defendant claiming that he had an “equitable property claim” over the BAYC NFT, aside from claims of breach of contract and unjust enrichment.
