How much money did the OpenSea executive's "insider trading" actually make?

Author: 0x13, 0x21, Rhythm BlockBeats

Can you imagine that "insider trading" could actually appear in the NFT field?

Not long ago, Coinbase was criticized for frequent occurrences of "insider trading" due to internal control issues, and now this problem has surfaced at the leading NFT trading platform OpenSea.

OpenSea's "Insider Trading"

On September 15, Twitter user Zuwu tweeted allegations that OpenSea's product head Nate Chastain allegedly engaged in "insider trading" operations using his position.

Before this, people had a very good impression of Nate. As the product head of OpenSea, Nate introduced many highly praised features, and OpenSea was able to update promptly based on user suggestions during the rapid development of NFTs, thanks in no small part to Nate. Moreover, Nate has always been seen as a very positive figure; there was an instance where a user mistakenly listed a Bored Ape NFT for an extremely low price, and Nate bought it to prevent the user from incurring a loss, later returning the Bored Ape NFT to the user after contacting them.

The revelation sparked significant discussion on Twitter, with some believing it would severely impact OpenSea and even the entire NFT field, while another KOL, Beanie, thought that people would quickly forget about this incident amidst the hype, and that this event might even accelerate OpenSea's plans to issue a token.

According to Zuwu's revelations, Rhythm BlockBeats conducted an in-depth search of Nate's wallet address to clarify the timeline.

First, Rhythm verified the main address used by Nate for "insider trading" operations on OpenSea as follows:

0xa3a4548b39DA96Eb065FF91811cA30da40431C0D

They found that Nate claimed to own CryptoPunk #3501 in his Twitter bio, which is also Nate's current social media avatar. Additionally, there is a domain named "natec.eth." From this, we can confirm that the owner of this wallet address is indeed Nate himself.

Next, we searched the transaction records of the address on the Ethereum blockchain, clarifying each step of Nate's operations with the help of Zuwu's revelations.

Taking Nate's most recent "insider trading" operation as an example, the 0xa3a address had two transactions: the first transferred 5 ETH to the 0x16a address, and the second received 7.13 ETH from the 0x794 address.

Next, we checked the transaction records of the 0x16a address, which transferred the funds to the 0x794 address just two minutes after receiving the 5 ETH.

When checking the transaction records of 0x794, we found that this address was used for trading NFTs on OpenSea.

We can view the specific operation process on OpenSea.

We can analyze how Nate's "insider trading" was conducted over time, and we need to know the following premises. The Twitter timezone is the same as the author's computer timezone, which is UTC+8; the times displayed on OpenSea and the Ethereum blockchain are in UTC.

OpenSea officially tweeted at UTC time on September 14 at 5:14, announcing the launch of works by artist Dailydust in the homepage recommendation.

Just ten minutes before the announcement, the 0x794 address bought a large number of Dailydust's NFT works and listed them at high prices.

After the announcement, with market promotion, many users bought in, and the price of the NFTs was driven up. The listings from 0x794 were completed, and ultimately, about ten minutes after the announcement, the last piece of artwork purchased was sold. From the time of purchase at 0x794 to the complete sale, it took less than twenty minutes, during which Nate earned 2.13 ETH.

According to incomplete statistics, Rhythm found that Nate had engaged in "insider trading" operations through the following addresses:

Trust Crisis of Major Platforms

As the largest NFT trading platform currently, every decision and action by OpenSea affects the development of NFTs. Once the platform experiences a "trust crisis," it poses a significant harm to both collectors and artists.

The homepage recommendations are meant to help outstanding works gain exposure and represent recognition of the artists' creations. For collectors who trust the platform, the recommended NFTs on the homepage signify official certification of artistic value and a guarantee of reliable investment. However, when the recommendation slots become a way for internal personnel to profit from information asymmetry, it is hard to say whether anyone will still buy NFTs recommended on the homepage, and it is difficult to determine whether "homepage recommendation" can still be considered a "recommendation." This is a huge blow to innocent NFT creators.

In the crypto world, every move we make can be traced. Every action we take is recorded on the blockchain. Faced with the rapid expansion brought about by the NFT market explosion, practitioners are constantly tempted by money, and if they are driven by profit to engage in actions that violate public morals, these will also be recorded. The "detectives" on the blockchain can expose them at any time, just like Nate in this instance.

The profits from Nate's "insider trading" operations are negligible for the entire market, but the issues reflected are far-reaching. Major players like Coinbase and OpenSea have serious internal control vulnerabilities, which pose risks that cannot be ignored. As practitioners, we must always remember that upholding ethical standards is key to maintaining market order.