Nevada Judge Tosses Lawsuit Filed Against OpenSea, Yuga Labs for Failure to Prevent Theft

Nevada Judge Miranda M. Du tossed a lawsuit filed against Yuga Labs, the parent company of Bored Ape Yacht Club — as well as major NFT trading platforms OpenSea and LooksRare — that alleged the parties failed to properly prevent and respond to NFT theft.

Robert Armijo, who filed the suit, was the owner of three BAYC NFTs that he purchased in November 2021 and January 2022. Armijo said that on February 1, 2022, he attempted to trade one of his NFTs on the messaging site Discord. Someone who purported to be interested in the trade sent him a link to initiate the trade, which Armijo clicked. The link was a phishing link that gave the hacker access to Armijo’s Ether wallet. The hacker then proceeded to steal Armijo’s NFTs and resell them on OpenSea and LooksRare.

When the lawsuit was filed last April, Armijo’s lawyers claimed that OpenSea and LooksRare failed “to implement common sense and reasonable security measures to prevent the foreseeable fraud and sale of stolen” property, the original complaint read. The lawsuit named Yuga Labs as a defendant for the company’s failure to “monitor its proprietary and exclusive ape community by denying entry to individuals whose access is predicated on a stolen BAYC NFT.”

The Judge dismissed the lawsuit for all defendants using reasonings respective to each defendant.

Yuga Labs had argued that the case, insofar as it concerned them, was moot because their company did not fall under Nevada jurisdiction as the company is incorporated in Delaware and has no employees in Nevada. Armijo’s lawyers tried to argue that because Yuga Labs does frequent business in Nevada that they could be tried in the state, but Judge Du disagreed.

“Merely having purchasers of its product or members of its personal club who reside in Nevada is insufficient to to make Yuga Labs essentially at home in the state of Nevada,” her decision read.

Accordingly, Judge Du could not rule on Armijo’s complaint lodged against Yuga Labs.

Judge Du also sided with OpenSea’s motion to dismiss. Armijo’s lawyers had argued that OpenSea had been negligent due to the company’s lack of an ownership verification process, or a system to quickly respond to reported thefts. Armijo had contacted OpenSea shortly after realizing his NFTs had been stolen, but recieved no response before the items were sold on the platform. OpenSea once had an ownership verification process, but that feature was removed in March 2021.

Du said that plaintiffs can only seek relief for damages done as a result of negligence if there is physical harm to one’s body or property; purely economic losses are not subject to negligence claims.

It is unclear why LooksRare was not mentioned in the Judge’s order. According to the docket for this case, LooksRare has not been mentioned as a plaintiff since March 2022.

OpenSea, Yuga Labs, and Armijo’s lawyers have not responded to ARTnews’s requests for comment.