By Lawfox | Algemeen | 24 February 2022 | 4 min. reading time
By order of February 4, 2022, the District Court of North Netherlands, location Leeuwarden, granted leave to make an attachment for the purpose of issuing an NFT. This is a first in the Netherlands.
Source image: https://www.cryptobatz.com/
Wouter Dammers, a lawyer at LAWFOX and specialized in IT law and crypto cases, filed the successful petition for the seizure. Subsequently, the seizure was made under the responsibility of Sjef van der Putten by Vurich Gerechtsdeurwaarders. The NFT is now held in judicial custody by the bailiff until the judge decides to whom it should be delivered.
Legal Qualification of the NFT.
In brief, the case concerns a claim for the issuance of an NFT. An NFT is an individual, unique, digital record of a file on a blockchain. In this case, it is an image of a bat from the “Cryptobatz” collection, with unique and rare features. This NFT is registered on the Ethereum blockchain. It was argued that the NFT legally qualifies as a thing, at least a property right.
Agreement to deliver the NFT not fulfilled.
The parties in question entered into an agreement on January 20, 2022, whereby the buyer instructed the seller to purchase an NFT for the buyer’s benefit. Although the seller purchased the Cryptobat, it did not transfer it to the buyer. The seller has therefore breached the agreement and is infringing on the buyer’s property rights. The buyer served the seller with a notice of default on January 24, 2022. Thereupon, the seller did not remedy its culpable breach and, moreover, expressly refused to perform. The seller is therefore in default. The buyer furthermore believes to be entitled to revindication.
The seller’s defence is that he has bought this Cryptobat for himself. The seller transferred another Cryptobat, with less rare characteristics, to the buyer. The seller would therefore have complied with the agreement.
However, the buyer has argued, with good reason, that the Cryptobat transferred by the seller is a different Cryptobat than the one he bought for the buyer. The buyer provided crypto currency and money for the purchase of and NFT to the seller. In response, the seller purchased a Cryptobat and confirmed to the buyer that he had managed to obtain one. The public, verifiable, and inviolable blockchain on which crypto transactions are recorded shows that this purchase is a transaction for the rare Cryptobat.
At the time of purchase, the parties did not know anything about its value because the characteristics of the NFT had not yet been revealed. After this “reveal” took place, it became apparent that the NFT is rare and potentially worth a lot of money. It was then revealed that the seller bought a second Cryptobat, with less rare characteristics, which is worth less. The seller transferred this Cryptobat to the buyer.
After the conflict escalated, it was revealed that the seller tried to embezzle Cryptobat. He transferred the Cryptobat to another wallet. Investigation revealed that this name was held by a friend of the seller.
Petition for a prejudgment attachment for the surrender of the NFT
The Buyer then applied to the District Court for the Northern Netherlands for permission to make a prejudgment attachment for the purpose of delivering the NFT, by handing over the private keys and the access and security codes to the wallets that are under the control of the Seller and his friend and to perform all actions that will prove necessary for this purpose on site. It was also requested that the NFT be placed in judicial custody. In addition, it was requested that the defendants be ordered to provide all necessary cooperation to effectuate the precautionary seizure, such as designating the seized objects, granting access to the room where the seized objects are kept and enabling the bailiff to take custody of the seized objects, such as handing over one or more private keys, passwords or login data and to pay the gas fee and all other necessary acts to enable the transaction to the custodial bailiff. It was requested that a penalty payment be attached for each violation and for every quarter of an hour that the non-compliance continues.
Because NFTs are relatively easy to remove or relocate, the interim relief judge was also asked to order an ex parte prohibition, on pain of a penalty.
Leave to make a prejudgment attachment in order to surrender the NFT
The court in Noord-Nederland granted all requests by order of leave of 4 February 2022.
