CryptoPunks — one of the most popular non-fungible tokens — displayed in Times Square on May 12, 2021.
Alexi Rosenfeld | Getty Images
“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 company wrote in a blog post on Wednesday.
While the statement did not identify the employee, on Tuesday evening, OpenSea’s head of product, Nate Chastain, was accused by Twitter user @ZuwuTV of using secret crypto wallets to front-run sales on the platform.
In a series of posts which have since gone viral, the Twitter user traced transaction receipts via the public blockchain, allegedly showing that Chastain would buy an NFT just before OpenSea featured the piece on the front page of its website, and then sell it after it jumped in price following the buzz of its main page listing.
In the company’s written statement, the startup called the incident “incredibly disappointing” and said that they are “conducting an immediate and thorough review.”
OpenSea would not confirm the name of the employee to CNBC “as of right now,” but a spokesperson said they would “update everyone eventually after an internal investigation is complete.”
Chastain’s public LinkedIn account is now listed as “unavailable.”
Chinese blockchain and crypto news platform 8btc traced the sales allegedly tied to Chastain and his front-running scheme, noting a collective profit of 18.875 ether, or about $67,000 at today’s price. CNBC did not independently confirm this figure, and OpenSea told CNBC it is not sharing how much the employee profited from the plan.
OpenSea logged a record $3.4 billion in transaction volume last month, according to Dune Analytics. Despite the billions of dollars worth of ether trading hands on the platform, the start-up seems to have been relatively lax with respect to restrictions around employees using privileged information to invest in NFTs. However, that is changing, starting today.
The company wrote that it has implemented two new employee policies, including banning OpenSea team members from buying or selling from collections or creators while they are being featured or promoted by the company, as well as barring staff from “using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not.”
The entire episode lays bare the regulatory gap that exists across large swaths of the wider crypto ecosystem. NFTs, in particula