The art collector Amir Soleymani is taking the digital platform Nifty Gateway to the UK's High Court over the sale of Beeple’s NFT Abundance earlier this year.
Solyemani (who goes by the online name "mondoir") lost out on securing the top bid for the work by the record-smashing digital artist to two other bidders, in an auction which closed this May. The highest bidder, according to the legal papers, was Ethereum’s co-founder Taylor Gerring (username tgerring), who subsequently walked away with the first edition for $1.2m.
Disappointed, the collector was then "shocked" to learn that the remaining top 99 bidders would be expected to pay for another edition of the work—allocated to them in order of their place in the closing bids (known as a ranked auction).
“Imagine bidding to win an item, ending up in second place and getting almost the same thing the third bidder gets but with a significant difference in bid amount,” says Soleymani, who was asked to pay $650,000 for the second edition of the work. “This method of auction maximises revenue for the platform and artists but is damaging to collectors.”
When he refused to pay, Nifty froze his account and blocked access to his assets—around 100 NFTs. In retaliation, Soleymani has instigated legal proceedings in both the UK and US, where the major NFT platform owned by Cameron and Tyler Winklevoss is based.
The UK lawsuit, which has been filed with the High Court, claims that the sale terms which Soleymani signed up to in February were changed in April, and that the true nature or reality of the ranked auction was not made clear to bidders prior to the sale. The suit will also challenge whether the enforceability of arbitration clauses in the terms are valid with the client’s "right to be sued in this country."
Nifty Gateway did not respond to The Art Newspaper’s request for comment. The company is known to have filed legal proceedings in New York this July to seek arbitration and resolve payment of the outstanding amount.
“The action reportedly taken by Nifty Gateway in freezing the claimant’s account, allegedly preventing him dealing with digital assets worth millions of dollars, in a market that moves quickly and in which agility to act can be invaluable, is one example of how much power the platforms can wield in this supposedly decentralised sector,” says Jon Sharples, an associate at Canvas Art Law.
At stake in the courtroom is the liability for the outstanding amount—rather than seeking damages—and the case is likely to be watched closely by the art law community, which is increasingly exploring challenges emerging through the interaction of the market with new digital platforms.
“There are still many uncertainties around NFTs and the contractual structures they can involve—from questions raised by SMART contracts to copyright and licensing issues—matters lawyers will no doubt chew over for some time to come,” says Emily Gould, a senior researcher at the Institute of Art and Law. She adds: “The old adage ‘caveat emptor’ (‘may the buyer beware’) holds true as much in the world of NFT sales as in any marketplace – perhaps even more so.”
