A recent cross-border lawsuit is a great reminder to engage in proper due diligence before participating in an NFT auction. Failing to do so could put you on the hook for money you didn’t intend to spend.
Beeple’s Abundance NFT Ranked Auction
A few months back, Nifty Gateway — the Winkelvoss-owned NFT marketplace — held a ranked auction for Beeple’s new art piece, “Abundance.” A hot lot, art enthusiasts from around the world bid on the token, including renowned collector Amir Soleymani.
In the end, Soleymani bid $650,000 but ultimately dropped out. Ethereum co-founder Taylor Gerring topped the field with a $1.2 million bid.
But It Was a “Ranked NFT Auction”
In most auctions, as the top bidder, Gerring would secure the prize. Moreover, he’d be the only person required to pay. But the event was a ranked auction, defined on Nifty Gateway as an auction where “the 100 highest bidders will all receive one of the editions, and will pay the price that they bid on the piece.”
So now, per the auction terms, Nifty wants Soleymani’s $650,000, but Soleymani doesn’t want to pony up. He explained to ARTnews that he’d never “previously encountered such an auction, which NG seems to have uniquely used for the Abundance NFT.”
And Soleymani has a point. Traditionally, a ranked auction is one where participants can see their standing in the bidding field at any given time. So in another timeline, Soleymani may have had a winning argument. But Nifty Gateway clearly defined the terms in an “information” pop-up on the “Abundance” auction page.
Consequences of Not Paying Up in Nifty Gateway Ranked Auction
The bottom line is that Soleymani ostensibly doesn’t want to pay for the third edition of “Abundance,” and his refusal has sparked lawsuits on both sides of the Atlantic.
After several attempts at recouping the $650,000 payment, Nifty Marketplace froze Soleymani’s account and severed his access to 106 NFTs he’d previously bought on the platform for hundreds of thousands of dollars. Then the Winklevoss outfit filed for arbitration in New York. Soleymani countered with a UK lawsuit and a countersuit in New York.
Notably, Soleymani isn’t suing over the “ranked auction” phrasing or terms. Instead, he’s arguing that he shouldn’t be expected to comply with “a contract wholly entered into and wholly performed within the State of New York” since he’s based in London.
According to his complaint, the English Consumer Rights Act of 2015, which mentions “digital content,” absolves him of compliance in this situation because it involves “matters of law with which he has no familiarity.”
Be Careful With NFT Auctions
Soleymani’s Nifty Marketplace lawsuits serve as warnings about NFT auction participation. Before bidding, make sure you understand the ins and outs of the auction rules. And don’t assume you understand the terminology used by marketplaces. If there’s an information tag next to a phrase, click it and read. NFT vernacular is still fluid, so double-check everything!
Consult With an NFT Lawyer
The Kelly Law Firm is a pioneer in the blockchain, crypto, and NFT legal space. We work with individuals, startups, and established businesses on smart contracts, traditional contracts, fintech registration, and other compliance and governance issues. Get in touch today.
