The ‘eBay of NFTs’ introduces new policy after insider trading claim.
According to an article posted on TechCrunch, it would appear that the largest NFT marketplace has run into a spot of hot water, with one of its top executives accused of insider trading on the platform.
CEO Devin Finzer released a blog post confirming that an independent review is underway. He also confirmed that the employee, the Head of Product for the business, had “purchased items that they knew were set to display on our front page before they appeared there publicly”. Finzer also referred to the incident as “incredibly disappointing” and not reflective of the company’s values.
They’ve now introduced a company policy that bans employees from buying or selling from featured collections and using confidential information to trade NFTs. Before the incident, neither had been exclusively covered by company policy, therefore, technically allowed.
Twitter user, ZuwuTV, was allegedly the first to shine a light on the suspicious activity, tweeting directly to OpenSea and naming Nate Chastain as the supposed perpetrator.
Hey @opensea why does it appear @natechastain has a few secret wallets that appears to buy your front page drops before they are listed, then sells them shortly after the front-page-hype spike for profits, and then tumbles them back to his main wallet with his punk on it?— ZuwuTV.eth 👻🎃🦇 (@ZuwuTV) September 14, 2021
ZuwuTV has apparently followed the ‘digital trail’ of the purchases and subsequent re-sells using the public Ethereum blockchain and traced them back to Chastain. In his tweet, he referred to the ‘front-page-hype’ concept in NFT sales, where those featured on the front page of marketplace listings were almost always guaranteed to sell at higher prices than those found in general listings. As a result, if buying the NFT prior to a known placement on the front page would lead to an opportunity to flip the NFT for a considerable profit.
One work, called Spectrum of a Ramenfication Theory, was bought for 0.25 ETH (£650) and sold for 1.5 ETH (£3,900) just 20 minutes later - after it featured on OpenSea’s homepage.
While the NFT market isn’t regulated with the same level as a publicly-traded company, for example, (where serious legal ramifications are enforced for similar behaviour), this incident highlights that the myth of blockchain being able to be used anonymously for nefarious activity is exactly that - a myth
At the end of the day, the public, and transparent, nature of blockchain technology will continue to be its greatest advantage over obscured, private databases and accounting records.