OpenSea, the world’s biggest NFT marketplace with $100M in daily volume, just learned a painful lesson — inside information can lead to unscrupulous trading by employees.
Devin Finzer, OpenSea’s co-founder and CEO, said in a blog post Wednesday that an employee purchased “items” ahead of their public listing on the auction site’s front page. With prices for CryptoPunks, Art Blocks Curated and other hot NFTs soaring, “frontrunning” public buying could generate substantial profits for an insider privy to non-public information.
“This is incredibly disappointing,” Finzer wrote. “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 third party review of this incident so that we have a full understanding of the facts and additional steps we need to take.”
OpenSea pledged to conduct an independent investigation of the matter. It also introduced policies barring employees from buying or selling NFTs that it’s featuring or promoting, and it prohibited team members from using “confidential information” to buy or sell NFTs on any marketplace.
Crypto twitter erupted upon learning such restrictions were not already in effect at a four-year-old venture that recently raised $100M in a fundraising round led by one of Silicon Valley’s leading venture capital firms, a16z.
“How are these rules not already in place?” wrote one twitter user with a CryptoPunk avatar.
“To expect a platform would have rules around ‘NFT insider trading’ is unreasonable imo,” replied another Punk. “But this is how rules are made.”
“No, to expect that is common sense. Don’t defend this behavior,” the first Punk retorted.
OpenSea did not identify the employee at the center of the episode. Earlier in the day, a person who goes by the handle ZuwuTV tweeted that it appeared Nate Chastain, the head of product at OpenSea, was using secret wallets to buy front page drops before they are listed. The tweet received more than 11K likes.
On Thursday, Chastain’s Twitter account indicated he was no longer employed at OpenSea. He did not immediately respond to a direct message asking for comment.