- 4 days ago
An Executive at NFT marketplace Opensea caught making trades with featured artist insider information.
Opensea fired a top executive this week after revelations of using insider information to profit. The former NFT marketplace employee used privileged inside information to buy NFTs ahead of the company promoting them.
Inside trading NFTs
Having an NFT or project featured on Opensea’s front page can do wonders for the project. That kind of exposure is quite likely to not only increase interstate in a collection or project but also prices. If someone were to know what projects or collections were set to feature on the front page in advance, they could make a lot of money. Through buying from the collection early before the project is featured, then selling the NFTs after, that buyer is using information the rest of the world does not have to profit.
This is what it seems, the now-former head of product at Opensea, Nate Chastain did. Chastine bought from different NFT collections days before being featured on the homepage for the marketplace. Consequently, he would use a number of different secret crypto wallets to transfer funds and make the NFT purchases. Once the collection premiered on Opensea’s homepage and interest in the collection spiked, Chastine would sell the NFTs for sizeable profits.
One example of this can be found in the buying and selling of a work tired “Spectrum of a Ramenfication Theory”. A wallet connected back to Chastine paid 0.25 ETH (~$890) for the NFT then sold it 20 minutes later 1.5ETH (~$5360). Meanwhile, this was directly after the collection was featured on the front page.
Twitter Detectives to the rescue
Chastine might have gotten away with it too if it hadn’t been for those pesky Twitter people.
The morally absent acts were first uncovered by Twitter user @Zuwutv.
And just like a villain from a cartoon, it was his own hubris that caused Chastine’s downfall. Chastine uses a CryptoPunk for his Twitter. Interestingly there was also a crypto wallet at the center of all of these trades with the same avatar. Subsequently, this allowed internet gumshoes to connect Chastine from Twitter to the wallet.
In response to all of this coming to light, OpenSea confirmed the reports and announced the resignation of Chastine.
“This is incredibly disappointing… Yesterday we learned that one of our employees purchased items that they knew were set to display on our front page before they appeared there publicly.”OpenSea said in a statement
While insider trading is illegal in the “fiat world’, as of yet it is not illegal in the crypto world. In fact, many trading acts that are illegal on the stock market are fair game in the unregulated world of crypto. In short, the only thing that stops many from doing things that question ethics are platform rules and terms of service. Up until this came to light, Opensea did not either.
In a blog post, OpenSea’s chief executive and co-founder, Devin Finzer said that his company was making changes. So, newly implemented policies now forbid Opensea employees from trading any collections that the site is currently featuring. Additionally, employees are no longer allowed to use confidential information to buy or sell any collectibles, on any platform.
One does have to ask though, why this was not a policy beforehand…. MOVING ON…
Insider trading NFTs
While insider trading in the stock market is generally looked down on, some on Twitter do not seem to think it applies to NFTs.
Others see this as a turning point for NFTs and how we think of traditional art.
Either way, it seems that a shift in how NFT marketplaces run might be in the not-so-distant future. When platform employees use their positions to manipulate the market, it can lead to a loss of credibility. Not only for the platform itself as to how can they be trusted to be a fair marketplace, but also for any project involved. Is the price of that project inflated due to outside or undue influence, or is it really worth that much?
For a more detailed explanation on how Nate Chastine allegedly washed cryptocurrency and NFTs check out CoffeeZIlla’s (no connection to NFT Zilla) video.