Friday, December 2, 2022

Insider NFT trading scheme on OpenSea platform

Famous Non-Fungible Tokens (NFT) crypto marketplace OpenSea reported on Wednesday that one of its leading executives has been exploiting the platform’s insider information to cannily market digital collectibles from his wallet. 

OpenSea disclosed that one of its employees was indulging in a trading scheme conducted by utilizing private crypto wallets to buy and sell NFT collectibles on its site and revealed that it will soon launch a detailed review on the matter. 

“Yesterday we learned that one of our employees purchased items they knew were set to display on our front page before they appeared there publicly,” OpenSea said on its blog

OpenSea is the leading NFT marketplace platform that provides users with a crypto wallet allowing them to buy and sell any NFT collectible. Its products range from high-brow photographs and portraits to tokenized unique Pokémon cards, electronic music, and many more. 

The platform welcomes billions of dollars’ worth of NFTs every month, and lately, increased its wealth to enlarge its platform.   

From its part, OpenSea has not revealed nor confirmed the employee’s identity. A Twitter user named ZuwuTV accused Nate Chastain, the platform’s head of product, of manipulating the use of crypto wallets to initiate a private sale program on its platform. 

In his Tweet, ZuwuTV revealed that on September 14th, OpenSea’s executive supposedly sent five Ethereum – an estimate of $18,000 as of today, according to CoinDesk – from his private wallet to an unidentified wallet, which was later forwarded to a third account, which was also anonymous. 

Another Twitter user, Ricefarmer.eth disclosed that Chastain also acquired four additional NFTs that were later featured on the platform’s “coming soon” section. The Twitter user then claimed that the account “flipped” the NFT’s profit to reach around two Ethereum – an estimate of $7,217 at today’s price, according to CoinDesk – which was then sent back to Chastain’s original wallet. 

Chinese Blockchain and cryptocurrency news agency followed the sales to Chastain and his front-running scheme while revealing that he managed to collect a profit of around 18.875 ether, rounding up to $68,100 as of the time of writing, according to CoinDesk. 

 Although, the sum was not confirmed by the online crypto marketplace as it informed CNBC that it will not disclose the amount of money profited from the scheme. 

Since Ethereum Blockchain is transparent, all conducted transactions are eternally saved on a public ledger, meaning any user can track the money trail of any account. And that is precisely what happened in Chastain’s case.   

Each transaction made is timestamped, and any NFT and Ethereum traded can be traced and identified. The plainness of the procedure always provided a transparent ecosystem to safeguard the community from undergoing complex schemes. 

In the ongoing investigation, OpenSea optimized its policies concerning its team members by prohibiting them from acquiring or selling from any collection or creator while promoting or featuring certain NFTs. Employees are also forbidden from utilizing classified information to obtain or sell any form of NFTs, whether posted on the OpenSea platform or any other site for that matter.