OpenSea executive’s CryptoPunk Twitter avatar helped web sleuths arrest him for NFT insider trading

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This week, it was revealed that a senior executive at OpenSea, the largest crypto collectibles market, took advantage of using inside information to purchase NFTs before his company publicly promoted them.

The platform’s product manager, Nate Chastain, used secret crypto wallets to purchase digital artwork before it was featured on the OpenSea homepage, a form of promotion known for drive up the price of parts. After the first wave of interest, Chastain then sold the NFTs, channeling the gains into a personal account.

In other words, he exploited his position to play the market in his favor.

The shady activity was first called on Twitter per user @ZuwuTV, which itself buys both NFTs and sells deliberately pixelated landscape images like the “”Pixelated Beauty”Collection on OpenSea. The news has spread online like wildfire.

It is the fact that Chastain used a unique CryptoPunk as his Twitter avatar that authorized online detectives to identify his wallet, which contains the CryptoPunk. (It’s CryptoPunk # 3501, with a blue bandana and little sunglasses, purchased for 26.98 Ether – $ 43,842 at the time – February 25, 2021.)

Screenshot from Nate Chastain’s Twitter, with CryptoPunk # 3501 as avatar.

OpenSea CEO and co-founder Devin Finzer confirmed the report in a blog post this week. “It’s incredibly disappointing,” he wrote. “We take 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 the further action we need to take.”

Chastain has since resigned, Finzer said.

Technically speaking, the actions of the product manager were not illegal. The buying and selling of NFT is not regulated by the Securities and Exchange Commission. Prior to the incident, OpenSea did not have any rules in place to prevent such behavior.

This last point, however, has since changed. In his post, Finzer said his company now has policies in place that prohibit employees from trading NFTs while the site is showcasing or promoting them and from using confidential information to buy or sell collectibles, “whether they are available on the OpenSea platform or not”.

Yet Chastain’s intense response to market machinations could be recognized as a turning point in our thinking of NFTs vis-à-vis traditional art.

“In the art world, if someone who worked in a gallery bought an artist’s art before a grand public opening, it would be… a normal Monday. tweeted Félix Salmon, Chief Financial Correspondent of Axios (and former contributor to Artnet News, this week).

“The fact that this kind of behavior is truly outrageous in the world of NFT is a very good indication that NFTs are much closer to being securities than to being art,” he added. .

Founded in 2017, OpenSea was valued to $ 1.5 billion this summer, following a $ 100 million Series B fundraiser. Company officials did not immediately respond to Artnet News’ request for comment on the Chastain incident.

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