A Canadian company is suing Sotheby’s and artist Kevin McCoy over the sale of an early NFT (non-fungible token) for almost $1.5m.
The artwork, Quantum, was first minted in May of 2014 and is regarded by many, including the auction house, as the first-ever NFT. It sold for $1.47m in June 2021 for $1.47m during Sotheby’s “Natively Digital” auction. But in a complaint filed on 1 February in the district court for southern New York, the plaintiff behind the Canadian company Free Holdings, of which this individual is the “sole member”, is claiming to be Quantam’s rightful owner and asserting that they had secured the rights to the work seven years after its creation after McCoy had let his ownership expire. The tech startup Nameless, which provided Sotheby’s with a condition report on the digital work prior to the auction, is also named as a defendant.
As the outlet Leger Insights explained, the quandary arose because Quantum was originally minted using NameCoin, a blockchain software modeled from Bitcoin’s code. Akin to the purchase of a domain name, NameCoins need to be renewed roughly every 250 days. After creating the work in 2014, McCoy did not renew Quantum in 2015, meaning that it could presumably be claimed by another individual. It sat un-renewed for six years until, in April of 2021, Axios ran an article with the headline “Exclusive: The first-ever NFT from 2014 is on sale for $7 million plus”, and roughly two weeks later an individual with the twitter handle @EarlyNFT registered as the owner of the dormant NFT.
According to court filings, “EarlyNFT is a pseudonym for Free Holding’s sole member.” This sole member then attempted to contact McCoy over the next month in a series of five tweets, which escalated in their hostility from “There’s a matter regarding your work ‘Quantum’ I’d like to discuss with you” on 6 April 2021 to, “Are you interested in participating in the sale of Quantum or not then?” paired with a Gif of Elmo shrugging, on 3 May 2021. McCoy did not respond to these tweets. According to the condition report listed on the auction lot, however, “this specific Namecoin entry was removed from the system after not being renewed, and was effectively burned from the chain”, meaning its ownership could not have been reregistered.
On 10 June 2021, the work was purchased by an individual named Alex Amsel, who immortalized the $1.47m purchase in a tweet from his account @sillytuna, which read, “So happy to own the first ever NFT, Quantum, from @mccoyspace. A piece of history. Let’s see how we can continue its story.”
According to the complaint, one week after the sale the plaintiff spoke to Sotheby’s senior vice president Caroline Moustakis by phone. “During that call, Free Holdings told Moustakis that the description that Sotheby’s posted of its Ethereum-based Quantum NFT was inaccurate and misleading because the Namecoin record had not been ‘burned’, but was still active and controlled by Free Holdings,” says the court filing. The plaintiff then requested again via email that Sotheby’s alter the record. In the complaint, they call for a permanent injunction to block the defendants from “promoting the sale of the New Quantum NFT as the Original Quantum NFT” and requiring them to make “corrective advertisements” and public statements.
Reached for comment, a Sotheby’s spokesperson said, “The allegations in this suit are baseless, and Sotheby’s is prepared to vigorously defend itself.”
In a statement, Colin Woodward, general counsel for Nameless, said, “Nameless was not involved in the creation of either of the Namecoin NFTs at issue in this suit. While we cannot further comment on ongoing litigation, the brilliance of NFTs is that the blockchain records historical provenance so ownership can easily be proven.”
UPDATE 6 February: This article was updated to include a statement from Nameless
Source: The Art News Paper
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