HOUSTON - OpenSea, a non-fungible token (NFT) marketplace, was recently sued for allegedly failing to take proper measures to protect users.
Widely referred to as the “eBay of NFTs,” OpenSea has handled over $11 billion sales in only four years of existence, including the sale of a Bored Ape Yacht Club NFT for $3 million. To use OpenSea, users must connect crypto wallets.
Court records show Timothy McKimmy filed a complaint against OpenSea in federal court, alleging the company was aware of security vulnerabilities in its platform, but did not properly inform its users and did not timely put adequate safety measures in place.
“Instead of shutting down its platform to address and rectify these security issues, Defendant continued to operate,” the suit states. “Defendant risked the security of its users’ NFTs and digital vaults to continue collecting 2.5% of every transaction uninterrupted.”
According to the complaint, the Bored Ape Yacht Club consists of 10,000 unique NFTs. The current price of entry for the lowest valued Bored Ape is 98 ETH, or $307,564 USD. Ownership of a Bored Ape NFT gives access to the Yacht Club, which contains numerous members-only benefits. One of the benefits is the ability to converse with other Yacht Club members, which to name a few includes NBA star Stephen Curry, Shaquille O’Neal and Dallas Mavericks’ owner Mark Cuban, along with tennis great Serena Williams, comedian Kevin Hart and music artists such as Justin Bieber and Eminem.
The plaintiff in the suit, McKimmy, asserts he is the rightful owner of Bored Ape #3475. On Feb. 7, his Bored Ape was stolen, listed, and sold to another individual on OpenSea’s platform.
“Plaintiff did not list his Bored Ape for sale on the marketplace,” the suit states. “Defendant’s security vulnerability allowed an outside party to illegally enter through OpenSea’s code and access Plaintiff’s NFT wallet, in order to list and sell Plaintiff’s Bored Ape at a literal fraction of the value (at .01 ETH). Essentially, OpenSea’s vulnerabilities allowed others to enter through its code and force the listing of an NFT. This is through no fault of the owner.
“After this forced entry through OpenSea code, and immediate purchase/sale, it was then immediately resold at 99 ETH, which is still vastly below value, based on the rarity of the Bored Ape. The ‘purchase’ or ‘sale’ of Plaintiff’s Bored Ape was reported by numerous social media accounts, due to its egregiousness.”
In his suit, McKimmy says he attempted to resolve the issue numerous times with OpenSea but the company ignored him and claimed to be “actively investigating” the issue, yet has failed to reverse the transaction.
“Plaintiff also attempted to resolve the issue with the individual who currently possesses Plaintiff’s Bored Ape. The individual refused to return it,” the suit states. “Plaintiff’s Bored Ape has significant value; this is unquestionable. For example, Justin Bieber purchased Bored Ape #3001 for 500 ETH, or $1.3 million at the time of the transaction. Bieber’s Bored Ape has a rarity score of only 53.66 and a rarity rank of #9777. In contrast, Plaintiff’s Bored Ape has a rarity score of 138.52 and a rarity rank of #1392. It is in the top 14% rarity, and it is significantly rarer than Bieber’s.
“Thus, Plaintiff’s Bored Ape’s value is arguably in the millions of dollars and growing as each day passes.”
McKimmy is bringing the suit to protect the interests of NFT owners who use OpenSea’s platform and to force it to enact sufficient security measures and address the known susceptibilities in its interface.
McKimmy seeks monetary damages of more than $1,000,000.
He is represented by attorney Andrew Dao of Daly & Black and attorney Ash Tadghighi of the Tadghighi Law Group.