OpenSea Employee Resigns Over NFT ‘Insider Trading’ Row
Community members had accused OpenSea employee of using insider information to buy NFTs being promoted by the site, then resell them for a profit
A platform for trading in non-fungible tokens (NFT) said one of its employees has resigned following a row over insider trading.
An investigation led by members of the community of trading platform OpenSea had accused the company’s head of product, Nate Chastain, of buying NFTs shortly before they were to be featured on the site, then selling them for a profit.
OpenSea said it had “requested and accepted” the resignation of an unnamed employee over the controversy.
The company said it has commissioned an independent inquiry, which is ongoing.
Transparency
TransparencyIt said it would “continue to invest in practices and policies that keep our platform open and transparent”.
OpenSea chief executive and co-founder Devin Finzer had earlier called the employee’s actions “incredibly disappointing”.
“This behaviour does not represent our values,” he added.
The firm also implemented rules disallowing staff from buying or selling from collections or creators while the items are being promoted, and from using confidential information to purchase and sell any NFTs, whether available on the OpenSea platform or not.
The site’s terms of service already prohibit “deceptive or manipulative trading activities”.
NFTs, a digital token of ownership, have soared in popularity over the past year and some have sold for tens of millions of pounds.
Digital assets
They can represent any form of digital asset, such as artwork, a significant Twitter post, a New York Times column or the original source code for the World Wde Web.
The field is unregulated, creating opportunities for abuse – such as insider trading.
However, because NFTs are bought and sold using cryptocurrencies such as Ethereum, the transactions involved are publicly visible on the currency’s blockchain, or digital ledger.
Community members took advantage of this fact to investigate Chastain’s trading activities, reporting that he allegedly used an anonymous account to buy NFTs shortly before or immediately after they were featured on OpenSea.
He then allegedly sold them once the site had increased their visibility, in some cases making thousands of pounds in profit.
A work called Spectrum of a Ramenfication Theory, for instance, was bought for 0.25 ETH (£650), then sold for 1.5 ETH (£3,900) only 20 minutes later, after it was featured on OpenSea’s homepage.
The community members said they were able to trace the transfer of funds between the anonymous account and the one publicly associated with Chastain.
