Inside buying and selling rumors concerning the OpenSea NFT platform are true


Rumors of insider trading on the NFT marketplace OpenSea are true, according to a statement from the startup recently valued at $ 1.5 billion.

“Yesterday we learned that one of our employees bought items that they knew would be displayed on our front page before they appear publicly there,” the company wrote in a blog post on Wednesday.

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

In a series of posts that have since gone viral, the Twitter user tracked transaction receipts over the public blockchain, allegedly showing that Chastain would buy an NFT just before OpenSea put the piece on the front page of their website and then sell it afterwards rose in price after the excitement of the main page listing.

In OpenSea’s written statement, it called the incident “incredibly disappointing” and said it is conducting “an immediate and thorough investigation”.

OpenSea would not confirm the employee’s name to CNBC “as of now,” but a spokesman said the company would “update everything upon completion of an internal investigation.”

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

Chinese blockchain and crypto news platform 8btc tracked sales allegedly related to Chastain and its front-running program and found a total profit of 18,875 ethers, or about $ 67,000 at today’s price. CNBC hasn’t independently confirmed that number, and OpenSea told CNBC that it doesn’t reveal how much the employee has benefited from the plan.

OpenSea had a record transaction volume of $ 3.4 billion last month, according to Dune Analytics. Despite multi-billion dollar Ether trading on the platform, the startup appears to have been relatively lax about restrictions on employees using privileged information to invest in NFTs. However, that changes from today.

The company wrote that it has introduced two new employee policies, including prohibiting OpenSea team members from buying or selling collections or creators while they are featured or advertised by the company, as well as prohibiting employees from “buying confidential information or sale to use “. all NFTs, whether or not they are available on the OpenSea platform. ”

The entire episode exposes the regulatory loophole that exists in large parts of the broader crypto ecosystem. NFTs in particular are in a legal gray area. They are not officially considered securities, nor are there many legal precedents for digital assets as a whole, so NFT-related insider trading does not appear to be illegal.

London-based fintech data analyst Boaz Sobrado said the OpenSea scandal made two things clear: the transparency of the blockchain makes it a powerful tool for monitoring shameful behavior, as all trades are public and recorded forever, and most importantly, that “regulators don’t” “don’t do 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 combat this type of fraud and misleading statements. “Said Sobrado.

“I think regulators don’t have the price in mind and pretty much anyone can get away with it,” he said.

Sobrado said that shows that the money has been so lost and the scams have become so brazen that the people involved neglect the simplest steps to cover their tracks.

“Again, this is an indication of the kind of wanton craziness that is going on in the industry right now,” he said. “Although it’s going well and everyone feels like they are rich, it doesn’t get that much talked about. But once the market collapses, a lot of these people will be exposed and a lot of people will be upset.”