Home News Cryptocurrency

The world of Web3 and blockchain is decentralised but not lawless, says lawyer

Khairani Afifi Noordin
Khairani Afifi Noordin10/21/2022 03:10 PM GMT+08  • 3 min read
The world of Web3 and blockchain is decentralised but not lawless, says lawyer
If the Singapore courts did not hear the case, there was no other appropriate forum. Photo: Bloomberg
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

While the world of Web3 and blockchain is a decentralised one, it is not a lawless one, says Withers KhattarWong lead lawyer Shaun Leong in response to the High Court’s issuance of its grounds for judgement on the barring of sale and transfer of a Bored Ape Yacht Club (BAYC) non-fungible token (NFT).

On May 13, the Singapore court granted a proprietary injunction to bar the sale and ownership transfer of a BAYC NFT on behalf of a Singaporean investor Janesh Rajkumar against a defendant under the pseudonym “chefpierre.eth”. Leong is the claimant’s legal counsel.

In court documents issued on Oct 21, High Court judge Lee Seiu Kin says while the decentralised nature of blockchains may pose difficulties when it comes to establishing jurisdiction, there had to be a court which had the jurisdiction to hear the dispute.

“In the present case, based on the available facts before me, that court was the Singapore court. The primary connecting factor was the fact that the claimant was located in Singapore, and carried on his business here,” he adds.

The court also held that if the Singapore courts did not hear the case, there was no other appropriate forum. This was because the NFT existed as code stored on the Ethereum blockchain, which is essentially a decentralised network of ledgers maintained in computers around the world. “The rule of law prevails,” says Leong.

He stresses that NFTs are not merely information or code on the blockchain, but also have the attributes of property. “Ultimately, the court found that our client's NFT was worth protecting and issued a worldwide proprietary injunction to protect the NFT,” says Leong.

See also: Crypto firm Genesis is preparing to file for bankruptcy

According to court documents, Janesh acquired the NFT on Aug 6 for 15.99 ETH ($29,407). He was a regular user on NFTfi, a community platform functioning as an NFT-collateralised crypto lending market.

Janesh would often enter into loan transactions with other users to borrow cryptocurrencies with NFTs as collateral — one of them being a BAYC NFT which allowed him to obtain larger sums of loans due to its rarity and high value.

For every loan transaction, Janesh’s agreement would include not allowing the lender to obtain ownership nor any right to sell or dispose of the BAYC NFT. The lender could only hold on to the NFT, pending the repayment of the loan.

See also: Founders of Three Arrows Capital mocked after seeking to raise US$25 mil for new venture

After numerous successful loans using the BAYC NFT, including one with chefpierre.eth, Janesh entered another loan agreement with the defendant on March 19. The loan for 150,000 DAI was subject to the claimant’s usual terms.

On April 17, Janesh asked chefpierre.eth for a short extension of time to repay the loan, which the latter agreed to. However, after a new agreement fell through, chefpierre.eth changed his mind, exercising a foreclosure which resulted in the NFT transfer from the platform’s escrow account into his crypto wallet.

Janesh then discovered that chefpierre.eth had listed the Bored Ape NFT for sale on marketplace OpenSea, with a number of offers. The claimant therefore filed a suit against the defendant claiming that he had an “equitable property claim” over the BAYC NFT, aside from claims of breach of contract and unjust enrichment.

×
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.