OpenSea Disables Trading of BAYC NFT Due to Singapore Court Action

Key Insights:

• OpenSea was back in the news this week, with the NFT marketplace disabling the trading of BAYC NFT #2162.
• According to a court filing, Janesh Rajkumar secured an injunction from the high court to block the sale.
• In December, OpenSea stepped in and froze stolen NFTs raising questions over decentralization.

Trading activity in the NFT space has been buoyant since the start of the year. In January, OpenSea saw trading volumes hit a record high before falling back.

The increase in trading activity and upward trend in NFT prices also fueled a rise in illicit activity. Governments responded to rising illegal activity, with the UK calling for greater regulatory oversight, not just of cryptos, but also NFTs. US lawmakers also responded, by clamping down on illegal activity.

With a global regulatory framework yet to be in place, however, illegal activity remains a bugbear for NFT collectors and lawmakers.

This week, the Singapore Courts delivered a message to those thinking NFTs are beyond the realms of the law.

Singapore Court Blocks BAYC #2162 NFT Sale over Loan Dispute

This week, OpenSea froze the trading of Bored Ape Yacht Club NFT #2162.

The NFT owner, Janesh Rajkumar, managed to get a Singapore High Court worldwide injunction to freeze the sale and the ownership transfer of the Ethereum (ETH) based Bored Ape Yacht Club NFT.

According to an insight piece from lawfirm Withers KhattarWong,

“The Singapore High Court’s injunction to protect an NFT is the first in Singapore and Asia, and the first globally in a purely commercial dispute. The injunction recognizes NFTs as an asset.”

Withers KhattarWong Partner and international arbitration and litigation specialist, Shaun Leong, said,

“We are the first law firm in Singapore, and one of the first few in the world, that is successful in obtaining a worldwide proprietary injunction to freeze a Bored Ape Yacht Club NFT sale on the blockchain against a Metaverse personality.”

Leong went on further by saying,

“The landmark ruling is also significant because it recognizes that Singapore courts can take jurisdiction over assets sited in the decentralized blockchain.”

By way of background, claimant Janesh Rajkumar used BAYC #2162 as collateral to borrow Ethereum (ETH) on NFTfi.

On March 19, 2022, the claimant entered into an agreement with a public persona, “chefpierre,” with a refinance option on April 20, 2022.

According to Withers KhattarWong, the claimant transferred BAYC #2162 to NFTfi’s escrow account as part of the refinancing agreement. The NFT would be held under escrow until full repayment of the loan, with the agreement of a loan extension.

In response to the claimant not repaying the loan, “chefpierre” foreclosed for breach of agreement. The defendant transferred the NFT to his personal Ethereum wallet and then listed the NFT for sale on OpenSea.

OpenSea Acts in Response to Items Obtained Fraudulently

It is not the first time OpenSea has intervened in NFT marketplace activity. In April, OpenSea delisted Sands Vegas Casino Club Gambler NFTs in response to cease & desist orders from the US states of Alabama and Texas.

In December, OpenSea froze 16 stolen Bored Ape and Mutant Ape NFTs worth $2.2 million. Unlike the case in Singapore and the US, OpenSea froze the NFTs at the request of famous gallery owner Todd Kramer. The intervention caused some to question OpenSea’s decentralized ethos.

Despite any clamor, OpenSea has clear and transparent policies and terms & conditions. These allowed and will continue to permit OpenSea to protect the rights of NFT holders.

According to the OpenSea Help Center,

“When OpenSea receives a credible report or learns that an item is stolen, we lock the item so that it cannot be bought, sold, or transferred using OpenSea. Items that have been locked will feature a red banner on the item page, indicating they are locked.”

The Help Center goes on to say,

“Locking the item on OpenSea does not prevent sellers from using other platforms not controlled by OpenSea or interacting directly with the blockchain to transfer or sell the items.

We are a peer-to-peer platform for buyers and sellers to connect with one another and we do not have custody of the NFTs on our platform.”