Invest: Bored apes in court

Posted by

Here is a lawsuit in which a guy (the plaintiff, Timothy McKimmy) is suing a non-fungible token exchange (the defendant, OpenSea) for allegedly negligently causing him to lose his NFT in the Bored Ape Yacht Club collection. He would like his ape back:

Plaintiff is the rightful owner of Bored Ape #3475. On or about February 7, 2022, Plaintiff’s Bored Ape was stolen, listed, and sold to another individual on Defendant [OpenSea]’s platform. Plaintiff did not list his Bored Ape for sale on the marketplace. Defendant’s security vulnerability allowed an outside party to illegally enter through OpenSea’s code and access Plaintiff’s NFT wallet, in order to list and sell Plaintiff’s Bored Ape at a literal fraction of the value (at .01 ETH). Essentially, OpenSea’s vulnerabilities allowed others to enter through its code and force the listing of an NFT. This is through no fault of the owner.

After this forced entry through OpenSea code, and immediate purchase/sale, it was then immediately resold at 99 ETH, which is still vastly below value, based on the rarity of the Bored Ape. …

Prior to the filing of this lawsuit, Plaintiff attempted to resolve the issue numerous times with Defendant. Defendant ignored Plaintiff. Defendant claimed to be “actively investigating” the issue, yet as of the filing of this Complaint, Defendant has failed to reverse the transaction, return the Bored Ape, and/or provide any adequate remedy 

Plaintiff also attempted to resolve the issue with the individual who currently possesses Plaintiff’s Bored Ape. The individual refused to return it.

Plaintiff’s Bored Ape has significant value; this is unquestionable. For example, Justin Bieber purchased Bored Ape #3001 for 500 ETH, or $1.3 million at the time of the transaction. Bieber’s Bored Ape has a rarity score of only 53.66 and a rarity rank of #9777. In contrast, Plaintiff’s Bored Ape has a rarity score of 138.52 and a rarity rank of #1392. It is in the top 14% rarity, and it is significantly rarer than Bieber’s. Thus, Plaintiff’s Bored Ape’s value is arguably in the millions of dollars and growing as each day passes.

I know this is normal now, this is just life in 2022, this ship has sailed. Still, imagine telling a federal judge “see, my cartoon ape is vastly more valuable than Justin Bieber’s because it is in the top 14% rarity, so please award me millions of dollars of damages against the exchange that negligently allowed someone to buy my ape for 0.01 ETH.” “What is an ETH,” the judge might reasonably ask. “The ape is a computer image, what does it mean that someone else possesses it, or that it is rare,” the judge might reasonably ask. “Why can’t you just right-click and save it, then you’d have your ape back,” the judge might reasonably ask. “Who is Justin Bieber,” the judge might reasonably ask.

“What do you mean that you are the rightful owner of Bored Ape #3475 when the blockchain shows definitively that it was transferred out of your wallet to someone else, who now demonstrably owns it,” you or I (not the judge) might reasonably ask, but that ship has also sailed. Everyone understands now that:

  1. NFTs are a kind of property.
  2. Possessing those NFTs on the blockchain — having them in your crypto wallet, having the private keys that allow you to transfer them — is not the same thing as ownership of that property, though it is an important indicator of ownership. (Just as possessing a bicycle is generally a good sign that you own it, but not definitive proof; “you stole my bicycle, give it back” is a coherent sentence, as is “you stole my NFT, give it back.”)
  3. Outside authorities — OpenSea and other centralized intermediaries, but also U.S. federal courts — can decide who owns an NFT, even if the blockchain says something different.
  4. For most practical purposes, what the outside authorities say about ownership matters more than what the blockchain says.

All of that seems fine, really, but the path by which we have arrived here is strange. The idea of crypto was to create a sort of property that could be evidenced through code, where ownership was decentralized and permissionless rather than intermediated through some traditional authority. And it worked, and NFTs became worth millions of dollars, which made them far too valuable to be subjected to the uncertainty of decentralized permissionless ownership. And so now if someone takes your apes on the blockchain, you can try to get them back in federal court. “Why is this my problem,” the judge might reasonably ask.

Elsewhere in the endless stealing of NFTs:

The co-founder of OpenSea said the non-fungible token marketplace is investigating a “phishing attack,” which doesn’t appear to be active.

“We don’t believe it’s connected to the OpenSea website,” Devin Finzer, who is also its chief executive officer, said on Twitter. “It appears 32 users thus far have signed a malicious payload from an attacker, and some of their NFTs were stolen.”

I have to say, I do not personally understand why people would pay a million dollars for a Bored Ape, but I gather that they value some sort of feeling of community plus bragging rights on Twitter. But by this point surely the club of people who have had their Bored Apes stolen is roughly as high-profile, exclusive and hyped as the club of people who own Bored Apes? If you get your ape stolen you should be able to mint an NFT “of” I Got My Bored Ape Stolen, and then you can hang out in the I Got My Bored Ape Stolen Yacht Club with all the other art-world influencers and venture capitalists and probably Justin Bieber in like a week. Or you can sell your IGMBASYC NFT for a million dollars, unless someone steals it first.