Singapore court freezes sale, transfer of a Bored Ape Yacht Club NFT

SINGAPORE’S courts have granted a proprietary injunction to freeze the sale and ownership transfer of a Bored Ape Yacht Club (BAYC) non-fungible token (NFT), on behalf of a Singaporean investor against an unknown defendant. 

The injunction was ordered on May 13 in the High Court and will be effective until after a trial of the matter. The investor, identified as Janesh Rajkumar on a court hearing list, is arguing for an equitable proprietary claim over the NFT, and accusing the defendant of wrongful conversion of the NFT as well as a breach of contract.

In January this year, Rajkumar reached out to the defendant, known only by the pseudonym chefpierre.eth, to refinance an existing cryptocurrency loan, according to a statement of claim presented before the court.

As with previous loans, Rajkumar would use his BAYC No. 2162 NFT as collateral, but the terms of agreement specified that the lender should “at no point” utilise the foreclosure option on NFTfi, the marketplace via which they were transacting. 

“BAYC No. 2162 (is) irreplaceably dear to the claimant and the claimant would definitely make full repayment of the loan in order to be able to retrieve BAYC No. 2162 from NFTfi’s escrow account,” the terms state. 

But even in the event where Rajkumar was unable to do so on time, the lenders should provide “reasonable extensions of time” for repayment.

On March 18, chefpierre offered Rajkumar a second loan of 150,000 Dai, a stablecoin, for 30 days at 45 per cent interest per annum. On April 17, Rajkumar asked for a “short extension of time” to repay this loan, to which chefpierre agreed. 

chefpierre also “provided reassurance” that Rajkumar would not lose the BAYC NFT, according to the claim.

On April 19, chefpierre agreed to a refinancing of the March loan.

However, chefpierre later repudiated the refinancing agreement and extended an ultimatum that he would exercise the foreclosure option if the March loan was not fully repaid within 7 hours. 

When time was up, chefpierre transferred BAYC No. 2162 from the escrow account to his cryptocurrency wallet. In an affidavit, Rajkumar said he has seen listings for the NFT on online marketplaces, fetching bids of up to 85.01 ether.

Rajkumar is claiming rightful ownership to BAYC No. 2162, and had specifically contracted under the terms of their agreement to prevent any possibility of losing the NFT. 

Rajkumar accuses chefpierre of tort of conversion, by wrongfully exercising the foreclosure of the NFT despite promising that he would not do so. Even so, the chefpierre’s use of this option “at most crystallised the lien” on BAYC No. 2162 but did not confer ownership rights or any rights to sell or dispose of the NFT, he argues. 

Rajkumar also accuses chefpierre of breach of contract, in relation to the March loan as well as the refinancing agreement.

In his affidavit, Rajkumar referred to BAYC No. 2162 as a “rare piece of art”, and said it would be worth at least 150 ether at present. One ether was equivalent to about about US$2,024 at time of writing, down 3.17 per cent from the previous day.

Built on the Ethereum blockchain, the BAYC collection of NFTs was launched in 2021. Sales of its NFTs have totalled over US$1 billion as of 2022, with celebrities such as Madonna, Justin Bieber and Jimmy Fallon among their owners. 

Rajkumar said the fact that BAYC No. 2162 was wearing a beanie makes it “rare and highly valuable”, as only 6 per cent of these NFTs have this trait.

He also maintained in the affidavit that foreclosures are “generally frowned upon” in the NFT community. 

“Borrowers usually avoid dealing with lenders with a record of foreclosing on any assets put up by their borrowers. This is also why there is nothing particularly unusual about an agreement which does not confer on the lender a power of sale of the collateral, as was my agreement with chefpierrer,” he said.

The court granted an application for court documents, including the claim, affidavit and the injunction order, to be served on chefpierre via his Twitter account, Discord account and the messaging function of chefpierre’s crypto wallet address.

Rajkumar’s lawyers from Withers KhattarWong said the case is unique as it allows court papers to be served via social media. Shaun Leong, the firm’s partner for international arbitration and litigation, also said the ruling recognises that Singapore courts can take jurisdiction over assets sited in the decentralised blockchain.