An art heist typically conjures the specter of balaclava-clad figures descending ladders, bamboozling security, and speeding away in getaway cars. But in the world of NFTs, the seizure of a multimillion dollar work of art can be achieved simply by knowing the rules of the decentralized system.
So it proved in the case of CryptoPunk #2386, which was acquired by an unknown person on September 11 for 10 ETH ($23,500), far below the market value for a CryptoPunk. Just days before, on September 6, for example, CryptoPunk #6915 sold for $1.5 million.
The story begins in 2020, a time when CryptoPunks, a collection of 10,000 randomly generated 24-by-24 pixel images, became among the most valuable and iconic NFTs. With CryptoPunks regularly selling for millions of dollars, a practice of fractionalized NFTs emerged, which segmented the collectibles into shares and thereby enabled many investors to own a piece of punk.
One platform that offered fractionalized NFTs was called Niftex and it allowed investors to buy and sell their shares via a smart contract on the blockchain. In 2020, the owner of CryptoPunk #2386 fractionalized it into 10,000 shares through Niftex, resulting in 257 fractional holders.
I don’t consider this a heist. It’s an arb. The smart contract worked as intended.
If you want decentralized systems you have to take the good with the bad. It’s part of the game. It’s why we’re here. If you don’t like those rules, you probably shouldn’t be playing.
— gmoney.9dcc.e τh (@gmoneyNFT) September 11, 2024
Niftex closed following the steep downturn of the NFT market in 2022, making it difficult for fractional holders to trade their Punk pieces. The smart contract, however, endured as a valid and immutable thing on the blockchain. One of CryptoPunk #2386’s fractional holders realized this fact and on August 28, triggered the so-called shotgun clause on the smart contract. The shareholder proposed buying all of CryptoPunk #2386’s shares at 0.001 ETH ($2.35) per share, giving fellow shareholders 14 days to counter the offer.
With Niftex’s notification system for such transactions no longer available, most shareholders didn’t realize the clock was ticking and they were about to lose their CryptoPunk for a fraction of its value. One shareholder who did realize was NFT collector Gmoney, who with help from blockchain experts attempted to block the bid with a counterbid. Gmoney failed to properly counterbid and so the sale went ahead.
3/ The setup is such that any shareholder can propose a “shotgun”, whereby any shareholder can propose a buyout price, and if nobody counters, they can purchase the asset after 14 days.
— Quit (@0xQuit) September 11, 2024
The savvy, clandestine nature of the acquisition led many in the crypto sphere to describe it as a heist. Adding to the interest was the fact that CryptoPunk #2386, which sports a two-tone sports head band and sunglasses, is considered especially valuable given it depicts an ape. The ape is a beloved beast in NFT communities and there are only 24 CryptoPunk apes.
Despite the loss, Gmoney didn’t see the maneuver underhand.
“If you want decentralized systems, you have to take the good with the bad,” Gmoney wrote on X. “It’s part of the game. It’s why we’re here. If you don’t like those rules, you probably shouldn’t be playing.”
As of September 12, CryptoPunk #2386‘s new owner had received a bid of $1.43 million.