Top NFT marketplace OpenSea admits shady employee dealings
When it comes to ripping off investors, decentralized technology still hasn't managed to disrupt the tried and true methods pioneered on Wall Street.
OpenSea, the self-described "largest" non-fungible token marketplace, admitted Wednesday that an employee had been secretly buying NFTs in advance of their listing on the site's front page. Using this non-public information, the employee was able to swoop up NFTs before their prices skyrocketed, and presumably make a hefty profit flipping them at a later date.
Think of it as investor front-running, but for the digital pixel-art age.
"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," read an OpenSea blog post.
Notably, OpeSea suggests that it was only after this incident was discovered that the company implemented internal policies to ban this kind of behavior.
"OpenSea team members are prohibited from using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not," the company explained.
We reached out to OpenSea in an attempt to determine which employee used confidential information to game its system, and whether or not they are still employed at OpenSea. We also asked how many NFTs the employee flipped in this manner and how much profit they made doing so.
We received no immediate response.
On Thursday, OpenSea published an update to its blog post stating that the company had asked for, and received, the resignation of the employee in question. The update still did not mention the employee by name.
Meanwhile, the NFT community has pointed its collective finger at Nate Chastain, OpenSea's head of product. We reached out to Chastain over Twitter direct message to ask him about the allegations, but received no immediate response.
Tweet may have been deleted
Tweet may have been deleted
Tweet may have been deleted
Tweet may have been deleted
On Thursday, Chastain's Twitter bio read "Past: @opensea."
OpenSea is a vital piece of the multi-billion dollar NFT market, giving investors and collectors a forum to buy and sell the digital tokens. Noted NFT projects, like CryptoPunks, have seen sales as high as $7.5 million.
That one of the largest players in the cryptocurrency-adjacent space had a problem with insider data access should come as no surprise. In 2017, the cryptocurrency exchange Coinbase was forced to issue a statement concerning insider trading following speculation related to price surges in Bitcoin Cash immediately before it hit the exchange.
And in March of 2021, the Commodity Futures Trading Commission reported that an early Coinbase employee had artificially driven up interest in the cryptocurrency Litecoin. Perhaps coincidentally, Litecoin founder Charlie Lee was Coinbase's director of engineering from July 2015 to June 2017.
SEE ALSO: So you spent millions on an NFT. Here's what you actually bought.
It seems that even in the complex modern world of cryptocurrency and NFTs, the old tricks still work best.
UPDATE: Sept. 16, 2021, 12:04 p.m. PDT: This story was updated to include additional comments from OpenSea made in an updated blog post, as well as to note a change to Nate Chastain's Twitter bio.