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OpenSea NFT Platform Insider Trading Rumors Are True

Rumors of insider trading in the NFT OpenSea market are true, according to a statement from the start-up, which was recently valued at $ 1.5 billion.

“Yesterday, we learned that one of our employees had purchased items that they knew needed to be posted on our homepage before appearing publicly there,” the company wrote in a blog post on Wednesday.

Although the statement did not identify the employee, on Tuesday evening OpenSea’s product manager Nate Chastain was accused by Twitter user @ZuwuTV of using secret crypto wallets to initiate sales on the platform.

In a series of messages which have since gone viral, the Twitter user traced the transaction receipts through the public blockchain, allegedly showing that Chastain would buy an NFT just before OpenSea featured the article on its website homepage, then sell it after increasing its price after the buzz of its main page listing.

In OpenSea’s written statement, he called the incident “incredibly disappointing” and said he was “carrying out an immediate and thorough examination”.

OpenSea has not confirmed the employee’s name to CNBC “at this time,” but a spokesperson said the company “will eventually update everyone after an internal investigation is completed.”

Chastain’s public LinkedIn account is now listed as “unavailable”.

Chinese blockchain and crypto information platform 8btc track sales allegedly linked to Chastain and his landmark project, noting a collective profit of 18,875 ethers, or roughly $ 67,000 at today’s price. CNBC has not independently confirmed this figure, and OpenSea told CNBC it is not disclosing how much the employee has benefited from the plan.

OpenSea posted a record transaction volume of $ 3.4 billion last month, according to Dune Analytics. Despite the billions of dollars in ether transactions on the platform, the startup appears to have been relatively lax when it comes to restrictions on employees using inside information to invest in NFTs. However, that is about to change, as of today.

The company wrote that it has implemented two new policies for employees, including prohibiting members of the OpenSea team from buying or selling collections or designers while they are featured or promoted by the company. company, as well as prohibiting staff “from using confidential information to buy or sell all NFTs, whether they are available on the OpenSea platform or not.”

The entire episode lays bare the regulatory vacuum that exists in large swathes of the broader crypto ecosystem. NFTs, in particular, exist in a legal gray area. They aren’t officially considered securities, nor is there much legal precedent for digital assets as a whole, so NFT-related insider trading doesn’t appear to be illegal.

London-based fintech data analyst Boaz Sobrado said the OpenSea scandal clarifies two things: Blockchain transparency makes it a powerful tool for monitoring harmful behavior, given that all transactions are public and recorded for always, and, most importantly, that “regulators are” not doing much “with this information.

“There’s a lot of talk about regulation right now, but what a lot of these bad actors are doing is clearly against the law right now. Regulators don’t need to expand their powers to be able to fight this. kind of fraud and misleading statements, ”Sobrado said.

“I think regulators don’t have their eye on the price and pretty much everyone gets away with it,” he said.

Sobrado said this shows that money has gotten so loose and scams have gotten so brazen that people who participate in them neglect the simplest steps to cover their tracks.

“This, again, is indicative of the kind of gratuitous madness that is going on in the industry right now,” he said. “Although things are going well and everyone feels rich, it isn’t talked about as much. But as soon as the market goes down, a lot of these people are going to be exposed and a lot of people are going to be angry.”

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