OpenSea, leading peer-to-peer NFTs and collectibles marketplace is under fire after admitting insider trading. An employee abused their position to front-run the purchase of NFTs before they were promoted on the website’s homepage.
OpenSea users have not been hiding their reaction, accusing the platform of ‘allowing’ insider trading.
However, as there is no specific NFTs legislation on such practices, some would say OpenSea, and the employee have done nothing illegal.
But at the same time, there’s no question that the practice is highly immoral.
Twitter Users Uncover ‘Insider Trading’ of NFTs On OpenSea
Things started to unveil on Tuesday when a Twitter user posted peculiarities with the buying habits of OpenSea’s Head of Product, Nate Chastain.
“Hey OpenSea why does it appear Nate Chastain has a few secret wallets that appears to buy your front page drops before they are listed, then sells them shortly after the front-page-hype spike for profits, and then tumbles them back to his main wallet with his punk on it?”
According to the Twitter user Zuwu, it seemed as Chastain was buying NFTs before they were listed on the front page. Following the front page listing, demand spiked pushing the price higher, resulting in an inflated sale and the funds going to his wallet.
The Twitter user did not make any allegations on the number of times he noted this. Also he didn’t comment on how much profit Chastain has gained from the activity.
Zuwu’s investigation was extensive, including wallet analysis, use of the Wayback machine, and following trails from wallet to wallet. He also encouraged others to do the same to pick up on any points he may have missed.
One such line of inquiry showed the transaction details of a 7.14 ETH ($25,659) transfer supposedly going to a wallet that Chastain controls.
OpenSea responded to the allegations with a blog post written by CEO Devin Finzer, admitting the accusations true. OpenSea was quick to point out that such practices do not reflect their values.
“This is incredibly disappointing. We want to be clear that this behavior does not represent our values as a team.”
The post added that they had opened a “third-party review” to establish exactly what happened, hoping to gather a better understanding of the situation and circumstances.
Following the incident, OpenSea has already brought in additional staff policies to prevent the same happening in the future. As part of the new policies, staff members are not allowed to buy and sell NFTs while they are featured or being promoted. Also the use of confidential information to trade NFTs across is banned on all platforms, not just on OpenSea.
Finzer ended the post, saying the firm is committed to winning back the trust of users.
Source: Storm on OpenSea After Admitting Employee NFT 'Insider Trading' – Fintechs.fi