OpenSea Insider Trading Rumors Are True

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

“Yesterday we learned that one of our employees had purchased items that he 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 the front page of its website and then the would sell after its price increased after the buzz of its main page listing.

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

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

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

Chinese blockchain and crypto news 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 sharing in the profits the employee made 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, as well as the prohibition on 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. TVNs, in particular, exist in a legal gray area. They are not officially considered securities, nor is there any legal precedent for digital assets as a whole, so insider trading related to NFT does not appear to be illegal.

London-based fintech data analyst Boaz Sobrado said the OpenSea scandal clarified 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 aren’t 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 explained.

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

In the end, Sobrado thinks 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 is again indicative of the kind of gratuitous madness that is going on in the industry right now. While things are going well and everyone is feeling 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, ”he said.