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The first conservatory seizure on an NFT

Publications | Christine De Keersmaeker / Thaissa Nuyens

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Following the seizure by the British tax authorities of three NFTs, the Dutch court in Leeuwarden, has also seized an NFT.

The dispute concerns an NFT from Ozzy Osbourne's "Cryptobatz" collection.

On 20 January 2022, the parties, concluded an agreement whereby the ‘buyer’, instructed the ‘seller’, to buy an NFT from the "Cryptobatz Collection" for the buyer's benefit from a ‘third party seller’. For this purpose, the ‘buyer’ did put both cash and crypto currency at the ‘seller's’ disposal.

The ‘seller’ proceeds to purchase the NFT from the ‘third party seller’. However, the characteristics, which determine how rare the Cryptobat, and thus the NFT, is, were not revealed until after the purchase. It turned out, after the purchase, that it was a rare NFT and worth a lot of money. The ‘seller’ therefore decides to keep the Cryptobat NFT in his own possession and to transfer another, much less rare, and thus less valuable Cryptobat NFT to the ‘buyer’.

The ‘buyer’ becomes aware of this and gives notice to the ‘seller’ to deliver the correct Cryptobat NFT. The ‘buyer’ believes that the ‘seller’ is in breach of its contractual obligations as he did not transfer to the ‘buyer’ the Cryptobat NFT specifically purchased for the ‘buyer’. The ‘seller’ does not respond to the ‘buyer’s’ formal notice and explicitly refuses to transfer the correct Cryptobat NFT to the ‘buyer’. Subsequently, the ‘seller’ allegedly transfers the correct Cryptobat NFT to a friend's wallet.

In view of the foregoing events, the ‘buyer’ decides to bring a claim for conservatory seizure before the Dutch court in Leeuwaarden. The ‘buyer’, among others, claims that the private keys, access codes and security codes should be handed over to the court’s bailiff, which would ensure that the NFT would not "disappear" during the proceedings on the merits of the case. The ‘buyer’ is of the opinion that a seizure of an NFT is indeed possible in view of the fact that an NFT should legally be qualified as an "object", or at least a "property right" which can thus be seized.

The Dutch court followed the ’buyer’s’ opinion and granted the conservatory seizure of the Cryptobat NFT. It required the ‘seller’ to hand over the private keys, access codes and security codes to the court’s bailiff, who will keep them pending a ruling on the merits of this first NFT case in the Netherlands.

The question therefore arises today whether the Belgian courts would also grant a conservatory seizure if sought, and if so, how. After all, like Bitcoins, the legal nature of NFTs is disputed, and like Bitcoins, NFTs represent an economic value / are assessable in money, belong to the holder's assets and are transferable. Consequently, NFTs should clearly not remain outside the reach of possible creditors. The question remains, however, which general principles of the Belgian legislation regarding seizure can be followed and how the seizure can be carried out. In our opinion, there is a case for streamlining the conservatory seizure of NFTs with that of domain names, so that the rules of seizure of intangible movable assets (other than claims) apply. However, it remains to be seen whether the Belgian courts will take the same view as the Dutch courts when a first seizure of an NFT is requested.

For more information on the intellectual property rights on NFTs, please read our previous article on this topic here