Plaintiff Demands Sotheby's Return of Fine Art NFTs After Security Breach
A John Doe defendant living in Taiwan entered into a contract with fine art broker Sotheby’s and consigned three pieces of fine art nonfungible tokens (NFTs) created by the artist Beeple that were stolen from plaintiff Augusto Reyes, alleged Reyes' fraud complaint Tuesday (docket 2:24-cv-03371) in U.S. District Court for Central California in Los Angeles.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
The three art NFTs are in the possession, custody and control of Sotheby’s, which was consigned the “stolen artwork for sale” in February, the complaint alleged. Plaintiff Reyes, a resident of the Dominican Republic at the relevant time of the lawsuit, is the “rightful owner” of the three fine art NFTs, which the complaint described as “cryptographic assets with unique identification codes and metadata that distinguish them from each other and cannot be replicated."
Reyes acquired the artwork from Mike Winklemann, also known as Beeple, for about $1 million through an online auction website, Niftygateway.com, on April 30, 2021, said the complaint. On March 31, 2022, Reyes withdrew the Beeple NFTs from Niftygateway.com to his “self-custodied” Ethereum address in three transactions, it said. On July 4, 2022, Reyes transferred the artwork to his primary Ethereum wallet address in three transfers, it said.
On Dec. 16, 2023, peer-to-peer trading platform NFT Trader experienced a security breach, resulting in the theft of “millions of dollars’ worth of NFTs,” said the complaint. The same day, the hacker acknowledged that the attack was an “exploit” and returned all of the stolen NFTs after asking 10% of the “floor price” of each one as a “reward," it said.
Three hours later, an individual using the Ethereum address Evart.eth also attacked NFT Trader and stole the Beeple artwork from Reyes’ wallet; the NFTs were transferred to a “smart contract controlled by Evart.eth,” the complaint alleged. Within minutes, Evart.eth transferred the artwork from his smart contract to his “EOA” address, it said. The artwork “was stolen” from Reyes’ wallet as a result of the NFT Trader breach, the complaint alleged.
On Dec. 17, Doe 1 transferred the artwork from his primary address to another he also controlled; the artwork was reported stolen to the FBI the next day, the complaint said. On Jan. 6, Doe 1 transferred the artwork “to and through three additional intermediate addresses in an attempt to ‘wash’” the artwork and "hide its true stolen origin,” alleged the complaint. On Feb. 21, the artwork was transferred by Doe 1 to an Ethereum address controlled by Sotheby’s, it said.
Reyes contacted Sotheby’s, which refused to transfer the artwork to Reyes but agreed to remove it from sale and to hold it until the works’ chain of title was resolved, the complaint said. Doe 1 contacted Reyes April 6 by direct message on social media asking to work out a solution regarding the artwork, it said.
On April 9, Reyes’ counsel demanded that Doe 1 authorize Sotheby’s to return the artwork to Reyes, but as of Tuesday, the artwork had not been returned, it said. Reyes contends that the artwork is his personal property and that he is the rightful legal owner; Sotheby’s “refuses to return” the artwork to Reyes, the complaint said.
Reyes brings claims of fraudulent transfer, conversion and replevin, plus violation of the Computer Fraud and Abuse Act. He seeks a judicial determination and declaration that the artwork is his personal property and that he is legal owner, the complaint said. Reyes seeks general, special, compensatory, statutory and punitive damages; return of the artwork; injunctive relief; attorney’s fees and legal costs; and pre- and post-judgment interest. Sotheby's didn't comment Wednesday.