CryptoPunks, one of the most popular non-fungible testimonials, was shown in Times Square on May 12, 2021.
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According to a statement from the startup, which was recently valued at $ 1.5 billion, rumors about insider trading in the NFT OpenSea market are true.
“Yesterday we learned that one of our employees bought items they knew they had to display on our cover page before they appeared publicly,” the company wrote Wednesday in a blog post.
Although the statement did not identify the employee, on Tuesday evening, OpenSea product manager Nate Chastain was accused by Twitter user @ZuwuTV of using secret cryptographic wallets to deal with sales at the platform.
In a series of publications which have since gone viral, the Twitter user located the receipts for the transactions through the public blog chain, allegedly proving that Chastain would buy an NFT just before OpenSea presented the piece on the cover from your website and then sell it after jumping in price after buzz from your main page list.
In the company’s written statement, the startup described the incident as “incredibly disappointing” and said it was “conducting an immediate and thorough review.”
OpenSea would not confirm the employee’s name on CNBC “right now,” but a spokesman said they would “update everyone eventually after the internal investigation is completed.”
Chastain’s public LinkedIn account is already listed as “unavailable.”
Chinese news platform on blockchain and 8btc cryptography tracked sales allegedly tied to Chastain and his front-running scheme, pointing to a collective profit of 18,875 ether, or about $ 67,000 at the current price. CNBC did not independently confirm this figure and OpenSea told CNBC that it does not share how much the plan employee benefited.
OpenSea recorded a record transaction volume of $ 3.4 billion last month, according to Dune Analytics. Despite the value of billions of dollars in ether trading on the platform, it appears that the launch has been relatively lax in terms of restrictions on employees using inside information to invest in NFT. Still, that is changing as of today.
The company wrote that it has implemented two new policies for employees, including banning members of the OpenSea team from buying or selling to collections or creators while the company presents or promotes them, as well as banning staff “Use confidential information to buy or sell any NFT, whether or not it is available on the OpenSea platform. ”
The entire episode exposes the regulatory gap that exists in large swathes of the wider cryptographic ecosystem. NFTs, in particular, exist in a legal gray area. Securities are not officially considered, nor are there too many legal precedents around digital assets as a whole, so NFT-related privileged trading does not appear to be illegal.
Boaz Sobrado, a London-based fintech data analyst, says the OpenSea scandal makes two things clear: the transparency of the blockchain makes it a powerful tool for controlling nefarious behavior, since all businesses are public and are recorded forever and, crucially, that “regulators are not”. t doing much ”with this information.
“There’s a lot of talk about regulation right now, but what a lot of these bad actors are doing is clearly against the law right now. Regulators don’t need to expand their powers to be able to fight these kinds of frauds and misleading statements,” he said. explain Sobrado.
“I think the regulators don’t have their eyes set on the award and almost everyone gets out of it,” Sobrado continued.
Sobrado, that’s what Sobrado thinks it shows that money has been lost so much and scams have become so blatant that the people involved are neglecting the simplest steps to cover their tracks.
“This again indicates the kind of desperate madness that is happening in the sector right now. While the march is good and everyone feels rich, there is not much talk about it, but as soon as the market falls, a lot of these people will be exposed and a lot of people will be angry, ”he said.