May 20, 2022
By Sharan Kaur Phillora
A court in Singapore has issued a freezing injunction preventing the sale of a Bored Ape nonfungible token, in one of the first cases of its kind that could have broad ramifications for digital assets. The injunction – basically a court order – saw a Singaporean man successfully stop the potential sale and ownership transfer of a rare Bored Ape Yacht Club (BAYC) NFT.
Here’s what we know:
OpenSea, the online NFT marketplace, has shut down trading of a certain Bored Ape amidst an ongoing ownership dispute case in Singapore. The NFT now sports a bright red disclaimer announcing that it has been “reported for suspicious activity.”
The plaintiff in the court case, Janesh Rajkumar, apparently used Bored Ape 2162 as collateral for a loan to borrow crypto, according to Bloomberg. Rajkumar sought an injunction, according to a court filing with Singapore Courts, and in a first-of-its-kind case, the court ruled that NFTs qualify as a digital asset that could be protected.
“It is the first decision in a commercial dispute where NFTs are recognized as valuable property worth protecting,” said Shaun Leong as cited in Bloomberg. Leong is the lead counsel for the case and an equity partner of Withersworldwide. “The implication is that NFT is a digital asset and people who invest in it have rights that can be protected.”
The defendant is the anonymous chefpierre. Rajkumar and chefpierre entered a loan agreement in March using the wesbite NFTfi, which allows NFT owners to “use the assets they own to access the liquidity they need,” per their website. Rajkumar would hold Bored Ape 2162 on NFTfi as collateral for the loan while it was repaid.
What really saved Rajkumar was the fact that he made sure to clearly specify in every loan agreement with lenders that he will never be relinquishing his ownership of BAYC No. 2162. In the event he’s unable to repay the loan in time, he made a promise in each agreement to inform the lender to provide an extension so that he can make full repayment to get the rare NFT back.
In the agreement, Rajkumar also specified that the lender is not allowed to use the “foreclose” option, in this case, taking full possession of the NFT in the event the borrower failed to pay back his loan.
But problems began when “chefpierre” declined lending the additional money to Rajkumar. In fact, the NFTfi user also threatened to take possession of BAYC No. 2162 if Rajkumar failed to pay back the loan by 5 a.m. on April 21, 2022.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.