The world’s first and largest NFT marketplace, OpenSea, is facing three separate lawsuits from plaintiffs who were unable to get access to their Bored Ape Yacht Club NFTs. Is this the start of the NFT bubble bursting?
Just when you thought you were bored hearing about Bored Ape Yacht Club and other such nebulous NFT jargon, in comes a story where you might be able to say, “I told you so”.
That’s because three people have filed separate lawsuits against OpenSea, the largest provider platform to trade NFTs. For those who don’t know, NFTs are unique digital certificates that are registered in a blockchain and record ownership of artwork or a collectible.
Some of the most sought-after NFTs sell for millions, which has led to everyone with a bit of money trying to get their (virtual) hands on some, from Justin Bieber to Azealia Banks. Such high-profile attention and purchases have inevitably generated big bucks. OpenSea’s valuation alone was estimated to be $13.3 billion (£10.2 billion) at the turn of the year.
Yet now, Timmy McKimmy of Texas and Michael Valise of New York are separately taking legal action against OpenSea after claiming they lost valuable Bored Ape NFTs as a result of a known security vulnerability in the company’s code. Their claims are similar, but it’s not yet known if they were subject to the same hacker.
Robert Armijo from Nevada, meanwhile, has said he lost his NFTs in a social engineering attack which he claims OpenSea’s negligence failed to prevent.
OpenSea have yet to comment on the specifics of these cases.
These lawsuits represent yet another round of issues that have beset the company, and the NFT marketplace overall, which now continues to see cases of theft and plagiarism on an ever-increasing basis.
Just a couple of months ago, the platform had confirmed that NFTs “worth £1.25 million” had been stolen from 32 users. This may actually seem like small change for a marketplace worth tens of billions, but it still emphasises the unregulated loopholes of this digital world.
A recent report released earlier this year in fact concluded that millions have been won by hackers, who have hiked-up the price of their NFTs.
They have achieved this largely through a practice known as ‘wash trading’, in which users trade NFTs between accounts to give a falsely large impression of their value. Whilst the practice is illegal, there is yet to be an enforcement action against anyone found to have been undertaking ‘wash trading’.
In January, too, OpenSea U-turned on the introduction of a limit on the number of NFTs users could create, which would have been set at five collections numbering no more than 50 NFTs (or 250 in total). The lack of prior warning was heavily criticised by users.
Once they changed their mind, OpenSea admitted, remarkably, that “over 80% of the items created with this tool were plagiarized works, fake collections, and spam” – a sign of just how out-of-control the marketplace is in trying to prevent fraud.
If similar such news as these recent lawsuits continue, they may put a pin in the digital balloon of NFTs, as we watch a slow, financial deflation of the marketplace’s value.
