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OpenSea admits incident after a top executive is accused of NFTs trading

After OpenSea admits that one of its workers used insider knowledge from the platform for NFTs trading, it is embroiled in a scandal. Yesterday, a prominent executive at NFT platform OpenSea was accused of buying pieces from NFT collections that are basically illegal NFTs trading before they were shown on the company’s homepage, and of front-running sales on the site.

The startup’s Head of Product, according to Twitter user @ZuwuTV, was buying drops before they were featured on OpenSea’s main website, selling them shortly after they were highlighted publicly by OpenSea, and funneling the money back to his main account. Basically, this was a case of unethical NFTs trading.

Users pointed to a handful of transactions on the public blockchain from accounts tied back to the executive, including an NFT drop that was active on the platform’s top page at the time.

OpenSea appeared to confirm the event today, writing on its blog that it had “learned that one of our workers purchased things that they knew were set to display on our main page before they appeared publicly.”

The business did not name the employee but said it was initiating an “immediate” investigation into the event. In an anonymous blog post, the business, which was recently valued at $1.5 billion after collecting a $100 million Series B from Andreessen Horowitz, said the episode was “very disheartening.”

In a tweet, OpenSea CEO Devin Finzer said, “We’re doing a comprehensive assessment of yesterday’s situation and are committed to doing the right thing for OpenSea consumers.” Employees at OpenSea, which saw a record $3.4 billion in transaction volume last month, appear to have been allowed to utilize confidential information to buy or sell NFTs on their platform to their consumers.

The company explained that team members would no longer be able to buy or sell “from collections or creators while we are featuring or promoting them,” and that they would be “prohibited from using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not,” according to the company.

Despite the SEC’s lack of official guidelines on the crypto asset class, most NFTs are not considered securities. Some in the industry have speculated that distinct purchasing and selling procedures, as well as continuous reward schemes, maybe pushing some NFT sales into securities territory.

“Many have been lured by huge rises in the value of new digital assets,” Senate Banking Committee Chairman Sherrod Brown said yesterday at a hearing on the nexus between crypto markets and SEC enforcement.

“A few expert investors and celebrities make it appear as if making millions is simple. But, as we’re constantly reminded, it’s seldom that simple – and all too frequently, someone’s fast windfall comes at the expense of people and entire communities.”

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Also read: SBI stops payments to crypto exchanges through UPI