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May it Please the Internet: Stolen Digital Assets

By John DiGiacomo

Stolen Digital Assets!

  • Opening: general chat about digital assets, how they can move, how they can be stolen, people forgetting bitcoin wallet passwords, etc.
  • This used to be about domain name
  • Continuing the NFT train – stolen NFT is the newest rage
    • Recent lawsuit – Armijo v OpenSea and Yuga Labs (BAYC) – District of NV
      • FACTS
        • Nov 2021, Jan 2022, P bought 3 BAYC/MAYC for total of about 80 ETH (about 300k)
        • Feb 2022, he wants to trade the MAYC for some “Cool Cats” NFTs
        • He goes on a discord channel and finds a willing trade partner
        • P alleges a third party trading service was needed to complete the trade, P wanted to use NFT Trader.io, other side agrees.
        • “A few minutes” after agreeing to the trade, the other side says he uploaded the Cool Cats to the website, and he just needs P to upload the MAYCs and complete the transaction. Other side sends P a link to the NFT Trader website.
        • P thought it was the real website, it wasn’t
        • He uploads, and clicks to approve the transfer, nothing happens, he clicks multiple times more, then he notices his ETH in his wallet is lower than expected, he checks the wallet, and BAYC and MAYC are gone.
        • Turns out the website was fake, every time he clicked to complete the transaction, he was allowing access to his wallet
        • He tries to tell Open Sea in order to prevent the re-sale, does the same on discord, reaches out to BAYC on discord, they tell him sorry and will try to help with Open Sea
        • 4 hours after they are stolen, they are all re-sold on open sea
        • It appears they were then later sold on LooksRare
        • New owners will not give them back unless they are paid what they lost
        • Complaint goes on to detail many other similar situations, complains of lack of gov regulations
      • CAUSES OF ACTION
        • Alleges OpenSeas grew too fast, not sufficient security protocols, same w LooksRare, says BAYC doesn’t do anything to prevent this
        • Negligence as to OS and LR – not maintaining the database for stolen items, not sufficient customer service
          • Points to media interviews about OS admitting they have an “obligation” as to security
        • Negligence as to BAYC – not monitoring the community for stolen items
        • Negligent supervision and training and negligent hiring as to OS and LR
  • Discuss SIM SWAP cases
    • What is a sim swap
    • How do they happen
    • Causes of action
    • Arbitration

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