OpenSea is the largest NFT marketplace in the world. In a tweet that has gone viral, the Head of Product at OpenSea was exposed for trading based on inside information. The employee took advantage of his position to flip NFTs for a significant amount of profit.
ZuwuTV’s thread on Twitter implicated Nate Chastain, the OpenSea employee, in insider trading of NFTs on the platform. While there are currently no definite rules in crypto and NFTs in general, the issue of insider trading has always been frowned upon in all types of trading circles.
ZuwuTV’s thread exposed a transaction on September 14, 2021, where Nate sent 5 ETH from his wallet to an anonymous wallet. He then used this second account to purchase NFTs from Daily Dust, an NFT artist on OpenSea.
Shortly after officially listing on the OpenSea front page, Mr. Nate flipped them. He made a 2 ETH profit in the process. Afterward, he sent the profits (in ETH) back to his main wallet address.
OpenSea Official Statement on the Issue
OpenSea verified this allegation and condemned the practice. According to Devin Finzer, co-founder of OpenSea, the company has strong responsibility towards its community. The company also takes any form of breach of trust very seriously.
Rumors in the Twitter crypto community suggest Mr. Chastain has left the OpenSea project. Nate updated his Twitter bio to “past: @opensea,” which led many to conclude that he is no longer working at OpenSea.
According to Mr. Devin, OpenSea requested and accepted a letter of resignation from Nate, whom they declined to mention by name in the statement. Moving forward, OpenSea has instated two new policies to makes sure the mistake doesn’t not occur again.
Insider Trading: Why is it Illegal?
Insider trading is the illegal buying or selling of public stocks, digital assets, derivatives, or, in this case, NFTs. Usually, company employees are responsible for this type of activity. This is because they have access to information that is not available to the public.
This act is illegal. It denies the platform users a fair chance of buying or selling an NFT.
Mr. Nate used burner wallets to purchase NFTs. He then sold them and gained some profits. The items were one before normal users had a chance to even bid on them.
Chastain transferred his gains to his main wallet, which had a CryptoPunk NFT uniquely belonging to him. The proof of ownership for NFTs is stored on the Ethereum blockchain. Therefore, Mr. Chastain’s CryptoPunk is unique to him. This erases any chances of mistaken identity.
Since the incident, OpenSea has put up new policies to prevent such activities from happening. This is almost equal to getting fired from their jobs at any moment should one be found practicing the act
Presently, the Crypto and NFT industries are largely unregulated. Hence, such acts go unpunished. Mr. Nate made hundreds of thousands of dollars from this activity. Yet, he walked away virtually free. The space needs more oversight.