A court in Singapore has issued a freeze on banning the sale of annoying app nonfunctional tokens, one of the first lawsuits of its kind that could have far-reaching implications for digital assets.
The NFT, the famed board app yacht club series, should not be sold until the ownership dispute is resolved after it has been pledged as collateral for a loan, a court has ruled. The law recognizes both fungible and non-fungible tokens as a form of property with which a court injunction can be attached, and the NFT case is a consistent application of the same principle, according to Hagen Rook, a partner at law firm Reed Smith LLP, who was involved in the lawsuit. .
“This is the first decision in a commercial dispute where NFTs are recognized as valuable assets to be protected,” said Shawn Leung, chief counsel in the lawsuit and an equity partner at Withersworldwide. “Therefore, more than the numbers and strings of code embedded in the blockchain, it means that NFT is a digital asset and those who invest in it have rights that can be protected.”
The claimant, a Singaporean who, according to the case filing, is an active dealer in crypto and digital assets, is a frequent borrower in NFTfi, a platform that allows people to use NFT as collateral for crypto loans. Defendant, whose username is chefpierre.eth but whose identity and physical location are unknown according to the filing, is a frequent lender on the platform.
Specific BAYC NFT, No. 2162, “is one of the claimant’s most valuable assets, and it is irrevocable to him,” according to the filing, which states that “he has no intention of participating or selling it.” However, he used NFT as collateral to borrow crypto because “because of its rarity and high cost” he could get large loans, the filing said.
In mid-April the claimant asked for a loan refinance for which the NFT in question was being used as collateral, but some time later, Shepherd gave a short time frame so that the loan could be repaid. After the claimant was unable to pay, Sheffield predicted the NFT, according to the filing. The plaintiff is alleging “unjust prosperity” in the case.
“Recognizing a person’s potential ownership of NFT in court is a positive for the industry,” said Chris Holland, a partner at Holland & Mary, a Singapore-based consulting firm that was not involved in the case. “This is a reminder to NFT buyers that they need to be aware of the rights and controls they give to third parties over an NFT. For example, it appears that the borrower does not know the ‘real life’ identity of the lender. This creates significant complications for the borrower’s legal process. ”
This is likely to be one of the many developments regarding NFT and rights in the Metavers space, according to Leung.
“With the advent of Metaverse, I wouldn’t be surprised if the next set of challenges revolves around virtual land ownership disputes and the pending resolution of ownership disputes in that virtual land blockchain,” he said. “NFT issuers (especially high-value NFTs) or core NFT marketplaces may be increasingly encouraged to have an open registry of NFTs where ownership of certain NFTs is formally disputed in the courts of law.”
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