The U.K.’s High Court ruled this week that NFTs are considered property and thus victims of NFT theft can now have their stolen assets frozen through court injunctions.
The decision comes after months of repeated NFT thefts, as savvy hackers have exploited loopholes and poor security literacy to seize high-profile NFTs. Just earlier this week, Bored Ape Yacht Club, possibly the most well-known NFT project, was hit with a massive hack, leading to an estimated $3 million in NFT assets stolen. So far, victims of theft have been left without much recourse given that the market is unregulated and decentralized.
That may now change, at least in the U.K., thanks to the case Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc Trading as Opensea, which was filed this past March. Osbourne, the founder of Women in Blockchain Talks, had two of her NFTs stolen from the Boss Beauties collection, a series of 10,000 NFTs depicting illustrated, diverse, successful career women.
The High Court’s ruling on the case, which is due to come out in writing next week, would allow victims to obtain court injunctions against individuals whose cryptowallet has been identified to be carrying a stolen NFT and to the NFT platform on which the stolen asset is being sold.
Kate Gee, a lawyer who has been briefed on the case by Osbourne’s barrister, Racheal Muldoon, told ARTnews the injunction can be served in just a matter of hours. That is, if you have the right information.
“You have the duty of full of disclosures where you have to present the pros and cons of your case to the court,” Gee said. “But then when the court makes that audit, that’s when you then serve the injunction. So what you need is a really good a team of people or an expert who can trace where that asset has moved on the blockchain.”
The ruling may draw criticism in the NFT space which has been divided on whether or not stolen assets are, in fact, stolen. Some crypto thought leaders adhere to a “code is law” ideology which insists that ownership belongs to whoever can prove that they hold the asset and that neither governing bodies nor NFT platforms should interfere with ownership disputes.
“Once you start to look at laws like what they’ve just created in the UK, that goes a bit against the ethos of decentralization, it’s just technically not decentralized at that point,” Lauren Dorman, a software developer who has been involved in the crypto space since 2014, told ARTnews.
“People in the space have mixed feelings about these kinds of developments [in law],” said Dorman. “Some people feel like it’s your own responsibility to learn how to protect your assets and then the other side is like, ‘Whoa, if we want to make this friendly for new people entering the NFT space or the Web3 space then it would be nice to have protections in place.’”
However, as Dorman noted, the decentralized nature of the blockchain could make the UK ruling difficult, if not impossible, to enforce.
“The only way you can serve this injunction to the thief is if you know their real identity,” said Dorman. “You can freeze assets on platforms but you can’t prevent private sales or transfers.”
Given that hackers involved in theft are by nature technologically savvy, they could hypothetically work around these injunctions. But the injunctions at least give victims a chance, especially if they move quickly and make sure not to alert the hacker to their actions.