Opensea, the world’s largest NFT marketplace, has announced that one of its senior employees is guilty of insider trading, using internal information to profit big on nonfungible tokens.
The popular marketplace stated that Nate Chastain, the head of product at Opensea, used internal information to purchase NFTs that was about to be featured on the company’s homepage and likely to spike in value.
On Wednesday, September 15, OpenSea CEO Devin Finzer tweeted: “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. This is incredibly disappointing. We want to be clear that this behaviour does not represent our values as a team. We are taking this very seriously and are conducting an immediate and thorough review of this incident so that we have a full understanding of the facts and additional steps we need to take.”
Opensea is investigating Chastain’s secret dealing after the accusations were made against him last night when community members publicly accused the employee of buying NFTs set to be displayed on the company’s website front page before their public listing.
Yesterday, a Twitter user named ‘ZuwuTV’ highlighted a tweet stating that Chastain operated “secret wallets” that purchased the platform’s front page NFTs before they were “featured,” and later selling them for a profit once the price spike because of their exposure.
Other Twitter users also accused Chastain of using a secret Ethereum wallet to snap up the site’s front page NFTs before their public release.
Some users mentioned a tweet by Chastain in August in which he appeared to admit that he bought an NFT by the Artist Arya Mularama ahead of the public listing. “I just wanted to get one of these before they all disappeared tbh,” Chastain tweeted during that time.
Using tools like Twitter’s advanced search function and Wayback Machine, ZuwuTV and other users showed that Chastain likely purchased NFTs that are set to be featured NFTs on the OpenSea website.
Seven months ago, Chastain bought CryptoPunk #3501 for 26.98 Ether (worth $92,000 at today’s prices), according to Opensea data. Since this NFT identified his Ethereum address, users were able to follow the money trail flowing into Chastain’s publicly known account, as the Ethereum blockchain transparently and permanently records all transactions on a public ledger.
Opensea has therefore introduced new policies stating that team members are now disallowed from buying or selling from collections. At the same time, they are being promoted or featured on the company’s homepage and not allowed to use confidential information to buy or sell NFTs, whether available on the company’s platform or not.
Rising Demand for NFTs
Built in 2017, Opensea is the largest peer-to-peer marketplace for crypto assets (nonfungible tokens), collectables, gaming items, and other assets backed by a blockchain. The firm is operating in a brand-new market but growing rapidly. The company has had over $200 million in trading volume in its platform since launch and over 12 million assets listed on the marketplace.
In August, Opensea recorded a $3.4 billion transaction volume on Ethereum, more than ten times the figure in July.
Data indicate unprecedented interests in NFTs – digital assets that can represent items that range from virtual real estate, video files to artwork. The rising demand and media attention have pushed the prices of NFT collections, and buying frenzy of such digital assets has also increased the prices of Solana and Ether and other smart contracts blockchains where nonfungible tokens can be created.
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