The Singapore High Court on Friday issued what some lawyers are describing as a “huge decision” in affirming the court’s jurisdiction over a case involving a non-fungible token (NFT), despite the borderless and decentralized nature of blockchain networks that host NFTs.
The case involves a plaintiff who used a Bored Ape Yacht Club NFT as collateral for an Ethereum-based decentralized finance (DeFi) loan of US$150,000 in March this year, according to court documents. The NFT was valued at US$500,000 at the time.
The defendant, who is known only under the online pseudonym “chefpierre,” later foreclosed the loan in a dispute over a refinancing of the debt and moved the NFT from an escrow wallet to a personal wallet, according to the court documents.
The judge in the case, Justice Lee Seiu Kin, in May placed an injunction to block any sale and transfer of the NFT in question – Bored Ape Yacht Club (BAYC) #2162 – and has now ruled Singapore has jurisdiction in the case.
“If the Singapore courts did not hear the case, there was no other appropriate forum. This was because the Bored Ape NFT existed as code stored on the Ethereum blockchain, which is essentially a decentralized network of ledgers maintained in computers around the world,” according to the latest ruling.
Shaun Leong, the lawyer for the plaintiff, said the decision has significant implications for the broader blockchain industry.
“For the very first time in a purely commercial dispute, we now have a court of law … [send] a clear signal to NFT investors all over the world that they have rights that can be protected,” Leong said.
NFTs Can be Considered Property
Seiu Kin ruled Friday that NFTs meet certain legal requirements to be considered property, such as being distinguishable from other similar assets and having an owner who can be recognized by third parties.
The judge issued this ruling as an explanation for the injunction he granted in May preventing any potential sale of a Bored Ape NFT. The Bored Ape Yacht Club is a collection of 10,000 cartoon monkeys that have often fetched prices in the realms of $150,000.
The claimant in the case used the NFT as collateral to borrow crypto from another party known by the pseudonym “chefpierre,” something he had done multiple times before with other lenders. However, in the midst of discussing refinancing their loan, “chefpierre” threatened to exercise the foreclose option on the NFT unless the loan was paid back in full, which the claimant was unable to do.
The judge’s decision may prove a watershed moment for NFTs should investors and traders be more confident that their status as property is recognized in law.
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