Expanding on its earlier decision in CLM v CLN and others [2022] SGHC 46 that cryptocurrencies are capable of giving rise to proprietary rights which could be protected by a proprietary injunction (refer to our earlier insight here), the Singapore High Court in Janesh s/o Rajkumar v Unknown Person (“CHEFPIERRE”) [2022] SGHC 264 (21 October 2022) held that injunctions could be granted against unknown persons and recognised that non-fungible tokens (NFTs) are also capable of giving rise to proprietary rights that can be protected by proprietary injunctions.

Background

An individual in Singapore (Janesh) owned an NFT known as the Bored Ape Yacht Club ID #2162 (Bored Ape NFT).  Janesh entered into various loan agreements with an unknown person known by the pseudonym “chefpierre.eth” (CHEFPIERRE), with the Bored Ape NFT as collateral. The loan agreements provided, among other terms, that Janesh retained ownership of the Bored Ape NFT and in the event of a default in payment, CHEFPIERRE should grant Janesh reasonable opportunities to make full repayment before taking measures to transfer ownership of the Bored Ape NFT.  In one loan agreement, CHEFPIERRE initially agreed to a short extension of time for repayment but subsequently changed his mind to list the Bored Ape NFT for sale. Janesh filed a claim against CHEFPIERRE and made an urgent application for a proprietary injunction.

Procedural and Jurisdictional Issues

In granting Janesh’s application, the court considered several jurisdictional and procedural issues arising from CHEFPIERRE’s anonymity.

The first issue considered was whether the Singapore court had jurisdiction to hear the application even though the domicile, residence, present location and identity of CHEFPIERRE were unknown.  Despite noting that the decentralised nature of blockchains pose difficulties in establishing jurisdiction, there must be a court which has jurisdiction to hear the dispute.  In this case, the court held that it had jurisdiction because Janesh was located and carried on his business in Singapore.  The court also held that a failure to state the name and identification number of a defendant did not amount to non-compliance under the new Rules of Court 2021 and was satisfied that CHEFPIERRE was sufficiently identified as the user behind the account and as the person to whom the Bored Ape NFT was transferred.

In addition, the Rules of Court 2021 are silent on allowing substituted service out of Singapore.  However, the court held that the Rules of Court 2021 are not a closed list and therefore granted Janesh’s application for substituted service to CHEFPIERRE’s Twitter account, Discord account and the messaging function of his cryptocurrency wallet address.

Recognition of NFTs as Property

In deciding whether to grant an injunction against CHEFPIERRE, the court had to consider whether the Bored Ape NFT or NFTs in general were capable of giving rise to proprietary rights which could be protected by an injunction.

For an NFT to be considered as property, it must be “definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability”.  The court held in the affirmative for the following reasons: 

• one NFT can be distinguished from another NFT because the metadata is unique;
• the presumptive owner of an NFT would be whoever controls the wallet linked to the NFT and, similar to cryptocurrencies, excludability is achieved because one cannot deal with the NFT without the owner’s private key;
• the nature of blockchain technology gives an NFT owner the exclusive ability to transfer the NFT to another party (i.e., the “right” of the owner) and NFTs are the subject of active trading in the markets; and
• the NFT has as much permanence and stability as money in bank accounts, which currently exist mainly in the form of ledger entries and not cold hard cash.

Key Takeaway

The recognition of NFTs as property expands on the High Court’s earlier decision to accept cryptocurrencies as property.  The recent decisions show that the Singapore courts are willing to apply traditional legal principles to modern products and services to safeguard an injured person’s right of recourse.

For More Information

OrionW regularly advises clients on FinTech matters.  For more information about FinTech regulations, or if you have questions about this article, please contact us at fintech@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.

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