OpenSea product head accused of insider trading
An OpenSea employee purchased NFTs before they were introduced on the site and subsequently sold them at a profit after their value rose.
- OpenSea’s Nate Chastain, the platform’s product head, has been accused of insider trading in NFTs pushed by the site.
- Chastain appears to have traded NFTs with inside information and then returned the profits to his public wallet, according to on-chain data.
- According to a blog entry published on OpenSea, the allegations are confirmed, calling them “extremely disappointing.”
The crypto community has accused product developer at OpenSea, the world’s largest NFT marketplace, Nate Chastain, of insider trading.
Chastain is accused of buying non-fungible tokens (NFTs) on the basis of confidential information before they were advertised on the homepage and reselling them at a profit.
When OpenSea highlights an artist on the homepage, her or his NFTs tend to appreciate in value, much like how tokens frequently rise after receiving a Coinbase listing. Chastain is said to have had inside knowledge that certain NFTs would be announced on the homepage, which he utilized to gain a leg up to profit.
After a Twitter user called Zuwu claimed to have studied on-chain data, the crypto community first became aware of Chastain’s activities. Their post accused Chastain of using “a few secret wallets” to purchase NFTs ahead of homepage listings, according to their tweet.
Someone had engaged in “flipping” NFTs on the site, as they were promoted and returned the profits to Chastain’s public address ‘0xa3a4’, according to Zuwu and other Twitter users who responded to the thread. The Ethereum Name Service domain natec.eth is registered to the same address and is used by Chastain as his Twitter avatar CryptoPunk #3,501.
Someone guessed to be Chastain purchased an NFT minutes before they were promoted on OpenSea’s homepage and Twitter account on September 14, then returned the money to Chastain’s natec.eth address.
I just wanted to secure one of these before they all disappeared tbh— Nate Chastain (natec.eth) (@natechastain) August 3, 2021
His actions have been compared to frontrunning or insider trading, which in regulated financial markets refers to dealing on information that isn’t yet available and is illegal.
On September 15, OpenSea published a blog post acknowledging Chastain’s conduct.
“Yesterday we learned that one of our employees purchased items that they knew were set to display on our front page before they appeared there publicly,” said OpenSea. “This is incredibly disappointing. We want to be clear that this behavior does not represent our values as a team. 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.”
The firm has implemented new policies that state that team members may not buy or sell from collections while they are being promoted and can’t use privileged information to do so.
It’s too early to tell whether OpenSea will prevent future incidents, and if the company has mechanisms in place to decentralize decision-making so that insiders within the organization are more accountable.