Welcome to our monthly NFT litigation roundup.
As the rise of Non-Fungible Tokens (NFTs) continues to soar, so too do the questions, legal issues and disputes around them. When faced with such a high growth phenomenon, the law can take time to catch up.
Boodle Hatfield is closely monitoring the developments and each month will bring you a roundup of the key NFT disputes to be aware of.
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United Kingdom
Lavinia Deborah Osbourne -v- (1) Persons Unknown (2) Ozone Networks Inc trading as OpenSea
- In this landmark ruling, NFTs have been recognised by the High Court as legal property capable of being frozen.
- The case concerns two NFTs (artworks from the Boss Beauties series), which were removed from the claimant's digital wallet in January 2022 without her consent or knowledge. In Court orders made on 10 and 31 March 2022, a proprietary freezing injunction was granted in respect of the NFTs until the end of the Court proceedings.
- Cryptocurrencies have already been recognised by the Courts as legal assets which can be the subject of court injunctions, but this is the first time that NFTs have had the same recognition.
- The ruling shows the flexible and willing approach the English courts have towards new technologies and is an important precedent in the legal status of NFTs. The ruling operates to give NFT holders some welcome legal recourse, and legal advice should therefore be taken as soon as an NFT owner discovers their NFTs may have been misappropriated.
Amir Soleymani -v- Nifty Gateway LLC
- In May and June 2021, Soleymani was involved in an auction for an NFT associated with the artist known as "Beeple". Soleymani submitted one of the winning bids for the NFT, with his bid of $650,000 ranking third highest.
- According to the terms of sale, Soleymani and the other 98 top bidders were expected to accept second edition (and lower value) NFTs. This meant Soleymani would receive NFT edition number 3 for $650,000. He refused to pay, arguing that his bids were made "with the intention of acquiring the original artwork offered for sale in the Abundance Auction and not the third or any other edition thereof".
- Nifty Gateway subsequently froze Soleymani's account and blocked access to his assets (which included over 100 NFTs).
- Nifty Gateway commenced arbitration proceedings in New York, and Soleymani filed a counterclaim in New York and issued a separate claim in London. Nifty Gateway contested the English Court's jurisdiction and sought a stay of proceedings.
- The questions before the English Court were whether the English court had jurisdiction and whether Nifty Gateway was entitled to stay the proceedings.
- The Court stayed the proceedings favour of the New York arbitration. It was not disputed that Soleymani was party to an arbitration agreement which provided for arbitration in New York and so the issues at hand relating to that arbitration should be heard by that tribunal.
- Although the case centred on jurisdiction issues, the High Court judge recognised an "interesting issue on the evidence as to the nature of NFTs as assets, and whether they are artwork, with the Claimant's position being that he was trading in digital art whereas the Defendant maintained that an NFT is merely a unique string of code stored on a blockchain ledger that makes a digital artwork accessible, and marks authenticity". This is perhaps a taste of arguments to come.
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