As the trading volume in non-fungible tokens begins to slow down from recent record heights, leading NFT marketplace OpenSea has been rocked by an insider trading scandal involving a senior team member.
Fast facts
- The company, dubbed “the eBay of NFTs,” issued a statement yesterday acknowledging it became aware on Tuesday that an employee had purchased items he knew were soon to be on the marketplace’s front page before it appeared publicly. In the statement, OpenSea says it has updated its company guidelines so that team members may not buy or sell NFTs while they are being featured on the site.
- While the statement did not name the team member involved, a viral tweet by a user named Zuwu emerged yesterday alleging OpenSea’s head of product, Nate Chastain, appeared to buy from page listings before they dropped, storing them in a secret wallet before selling them back after the initial launch would typically boost their price.
- Debate continues on how lawmakers might best regulate the industry. As NFTs are not considered securities or commodities in the U.S., insider trading on such tokens may not be technically illegal. Regardless, OpenSea is taking the allegations seriously, reiterating that Chastain’s behavior was against company guidelines.
- In testimony this week before the Senate Banking Committee, Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said many cryptocurrencies — including stablecoins — are in fact securities. The statement provides further clarity on the SEC’s position on crypto as lawmakers around the world wrestle with how to regulate the crypto industry.
- The scandal comes only a few months after the company reached a valuation of US$1.5 billion in its latest funding round, as transaction volume last month grew to US$3.4 billion — up more than 10 times over the previous month. Recent data shows this trend is slowing down, however, as daily trading volume on OpenSea has declined by more than 80% since its high in August.
- Another controversy in the NFT space has erupted recently as Tron Foundation CEO Justin Sun announced on his Instagram account that Gate.io, the newly Tron-integrated NFT platform, will be hosting artwork by artist “KAWS.” The only issue is that KAWS did not authorize the minting of NFTs of their work.
- S.K. Lam, founder and CEO of All Rights Reserved, a Hong Kong-based studio that KAWS often works with, confirmed in an email statement with Forkast.News: “This was not authorized by KAWS.”
