OpenSea product chief accused of flipping NFTs using insider information

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OpenSea product chief accused of flipping NFTs using insider information

OpenSea, the biggest NFT trading marketplace, said today that one of its employees used internal information to buy NFTs that were about to be featured on its homepage — and likely spike in value. Accusations were made against OpenSea’s head of product, Nate Chastain, last night after a community member publicized suspicious transactions from his wallet. “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,” the announcement tweeted by OpenSea CEO Devin Finzer read. “​​This is incredibly disappointing.” The site explicitly prohibits “deceptive or manipulative trading activities” in its Terms of Service.

The statement was prompted by a community-led investigation of Chastain’s trades. On Twitter yesterday, a user named ZuwuTV posted a thread claiming Chastain operated “secret wallets” that purchased the site’s front page NFTs before they were “featured,” later selling them for a profit once the price increased due to their exposure. In the thread, ZuwuTV identified a September 14th transaction where Chastain allegedly sent 5 Ethereum (around $17,000 USD) from his known wallet to an anonymous wallet that then sent the money to a third account. According to another user, ricefarmer.eth, the account purchased four NFTs by artist Dailydust, one titled “Spectrum Of A Ramenfication Theory,” which OpenSea directly featured soon afterward. The account is then alleged to have “flipped” the NFTs for a profit of roughly 2 Ethereum and funneled the money back to Chastain’s original wallet. OpenSea has not confirmed which NFTs were traded on using internal information.

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As the NFT community picked up on ZuwuTV’s investigation last night, he posted more transactions suggesting that the front running behavior could have begun as early as last month. Using tools such as Wayback Machine and Twitter’s advanced search function, ZuwuTV and other users showed that Chastain likely purchased would-be-featured NFTs before or immediately after the OpenSea website updated. Like other NFT platforms such as Nifty Gateway, OpenSea’s front page is curated by hand rather than algorithmically determined.

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