Chinese court rules marketplace guilty of minting NFTs from stolen artwork

A court in the Chinese city of Hangzhou ruled a one-of-a-kind judgment against a nonfungible token (NFT) marketplace for allowing a user to create (or mint) NFTs of stolen artwork.

As reported by South China Morning Post, the court verdict toward the NFT marketplace was made after Shenzhen-based company Qice filed a lawsuit against NFTCN’s parent company, BigVerse.

The lawsuit claimed that an NFTCN user stole a copyrighted artwork of Ma Qianli, a Chinese artist specializing in drawing and printing. The user of the NFT platform allegedly poached one of Ma’s creations of a cartoon picture.

Based on the evidence collected, the court found the NFTCN platform guilty of not checking for forgery or intellectual property (IP) theft prior to allowing users to mint NFTs. As a result, NFTCN was charged for facilitating the infringement of the owner’s “right to disseminate works through information networks”.

The artwork in question was a cartoon tiger receiving a vaccine shot, which was sold for $137 (approx. 900 Chinese yuan) to an unknown user on the NFTCN platform. However, BigVerse was ordered to pay a fine of $611 (or 4,000 yuan) to Qice in addition to stopping the circulation of the stolen artwork NFT by sending it to an “eater address.”

Eater addresses stop the transfers of NFTs as they inherently are void of private addresses — fundamentally working similar to a burning mechanism in cryptocurrencies. Despite China’s aggressive stance against the crypto ecosystem, the country has been apprehensive about banning NFTs.

Related: China-based regulatory and trade associations target NFTs in latest risk notice

While China has refrained from imposing a blanket ban on NFTs despite going strong against crypto, three Chinese authorities jointly issued a public warning about the “hidden risks” of investing in nonfungible tokens or NFTs.

The departments — the China Banking Association, the China Internet Finance Association and the Securities Association of China — launched initiatives to encourage innovation in the crypto and blockchain space focused on NFTs as well as “resolutely curb[ing] the tendency of NFT financialization and securitization” to reduce the risks around illicit activities.

The government has also warned citizens against using Bitcoin (BTC) and other cryptocurrencies like Ether (ETH) or Tether (USDT) for sale or purchase of NFTs.