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Former OpenSea employee charged in digital asset insider trading scheme
- anm89 4y agoOn one hand I support this. On the other hand, pinning one guy to the wall in an industry where every single person is doing this seems a bit unethical. The real smart move is to stay as far from the NFT market as possible because the whole thing is rotten at its core.
- boeingUH60 4y agoIt's funny how after being exposed for insider trading (before this formal indictment), this guy went on to launch another NFT startup https://www.coindesk.com/business/2022/03/31/opensea-exec-who-quit-after-insider-trading-scandal-is-back-with-nft-platform/ https://www.coindesk.com/business/2022/03/31/opensea-exec-wh...
- itsoktocry 4y ago>this guy went on to launch another NFT startup a16z just put $80 million into Adam Neumann's new crypto idea. Everybody is, shamelessly, out to get theirs.
- dvtrn 4y agoI have a friend that I am watching in real time literally bankrupt themselves trying to find the golden NFT ticket that will turn them into a millionaire. They’ve openly said as much. If it happens I’ll eat my proverbial shoe but so far all I’ve seen come from it is them losing their job, home and college scholarship in the span of about 6 months. It’s…tragic.
- fullshark 4y agoHey it beats working for the man for 40+ years, enjoying a modest retirement, then dying.
- dvtrn 4y agoYeah on the one hand I’m not against trying to get out of the grind and achieve that sweet financial independence. Would I throw $25,000 into NFT’s to get there though? Eh. Probably not.
- beepbooptheory 4y agoMaybe this is a little sarcastic but i do honestly think this argument has a lot traction to especially younger people. You can yell to your red in the face about how its all a scam, its immoral, its built to crash, but I think a non negligible amount of people still think its a better ride than any other options available to them. Its not right or wrong, just is what it is.
- deleted 4y ago[deleted]
- fleddr 4y agoYou're absolutely right and this is the part that many do not understand about crypto culture. Its players are fully aware of most of it being a casino. They play anyway. They do not want to be "rescued" by your moral preaching or regulation, they willingly take big risks, often lose it all, and then do it again. Crypto, as they see it, is the only asymmetrical bet of their lifetime. The only way to "make it". And making it doesn't even have to mean millionaire status, it could just mean any type of life improving wealth. So "adults" preaching about why they can't just be "normal" and financially sane, are deeply out of touch. "Normal" as in...student debt, stagnant wages, unaffordable housing, healthcare costs that can bankrupt you, double digit inflation, one crisis after the other (9/11, financial crisis, COVID, war), job insecurity, climate change, political boiling pot...that kind of "normal"? Many if not most young people cannot get ahead by doing "normal". They can't even reach middle class. If doing all the right things leads to a miserable result, any escape hatch is embraced.
- jazzyjackson 4y agototally agree with you, but I wonder if things would be different if the players of the casino were aware that the jackpot winners were plants, fakes, renting lamborghinis or worse, actually profiting on money laundering schemes while passing it off to their instagram followers as being a good day-trader. just shaking my head that anyone thinks putting their life savings into an alt-coin has any chance of going well for them
- deleted 4y ago[deleted]
- exdsq 4y agoShould have used that money to trade several of the same brand of NFTs to build the trading volume up :P
- onlyrealcuzzo 4y agoIt seems it'd be a lot easier to just get a jog at FAANG for 2 years...
- TaylorGood 4y agoAs someone who got into BAYC during mint week, I knew it was 2021's version of CryptoPunks, but still couldn't have told you it would surpass X amount in value.. Doodles, MoonBirds, freakin' Goblins... surprised nearly every time.
- giarc 4y agoWhat I don't get about Neumanns new project is it actually solving a problem? As I understand, the problem with carbon offsets is not that you can't track them, it's that you can verify that X company actually planted a tree etc. Is Neumanns company solving this, or just simply putting a record of Y company purchasing 1000 carbon offsets on the blockchain?
- JumpCrisscross 4y ago> a16z just put $80 million into Adam Neumann's new crypto idea. Everybody is, shamelessly, out to get theirs a16z f/k/a Andreeseen Horowitz is, even more than Tiger Global and SoftBank, at the vanguard of moral vapidity. The only thing weaker than their spines may be their returns.
- TaylorGood 4y agoAs someone very active in that space, he went dark after the OpenSea incident and it's not widespread that he started something new. This is also news to me.
- dropnerd 4y agoit surfaced for a day or two on my twitter timeline and then disappeared
- exolymph 4y agoayo, you don't have contact info on your profile so i'm commenting here. I want to interview you for the company blog: https://blog.hedgehog.app/ https://blog.hedgehog.app/ if you're interesting, hit up sonya@hedgehog.app
- dropnerd 4y agohi sonya! i'm not currently taking interviews but i'll reach out if this changes. thanks for the interest! dropnerd
- tofuahdude 4y agoThere must be 1,000 cases like this for every one that is prosecuted. The crypto community did the research / job for the FBI here.
- hamiltonians 4y agonot really. how many nft marketplaces are as big as opensea? this was a big target.
- practice9 4y agoThis is one of the benefits of the transaction data being on-chain
- colejohnson66 4y agoSupposedly Monero is better at being anonymous than Bitcoin/Etherium, but NFTs are all on Etherium
- ChainOfFools 4y agoMost, not all. A few of the earliest (appearing before the term NFT existed) run on Bitcoin itself, using the counterparty protocol.
- chrisco255 4y agoMonero can't do smart contracts as far as I know. However there is somewhat of a push to adopt privacy focused zero knowledge rollups, which would preserve privacy while settling on a layer 2: https://aztec.network/ https://aztec.network/
- rvz 4y agoThere you go. This is why committing insider NFT trading using a public blockchain where the transactions are traceable where the authorities can use that and the transactions all end up being connected to this employee (even though they tried using multiple wallets) is quite futile and eventually they can be traced all up. Goes to show that such blockchains like Bitcoin, Ethereum, etc are NOT anonymous and never intended it to be as such in their white-papers. So it's quite disingenuous for anyone to keep suggesting that they are 'anonymous' whether or not if they are skeptic, supporter or neither. What you are looking for is privacy coins like Monero, Mobilecoin, Zcash or Grin that specifically aim for privacy guarantees which are used to hide wallet balances and transaction details. But the regulators are going to crackdown on privacy ones anyway by making it harder to trade them for fiat via exchanges.
- TedDoesntTalk 4y agoNo mention of how much he earned with this scheme.
- hamiltonians 4y agoprobably not that much, 100k or so.these were not ape nfts.
- TaylorGood 4y agoIt's well known within the space.. in total he made ~18 ETH from this side hustle.
- yieldcrv 4y agoNote: they are charging him with wire fraud and money laundering. The DOJ is not attempting any insider trading specific charge or aiming to define the NFT assets traded. But like insider trading, the wire fraud charge is contingent on the existence of the confidentially agreement with his employer.
- dubswithus 4y agoWill the buyers of the NFT's be able to sue this guy?
- colechristensen 4y agoSeems like they would have a decent case.
- chrisco255 4y agoInsider trading is not contingent on a confidentiality agreement with an employer. It's an actual law on the books: https://www.law.cornell.edu/wex/insider_trading https://www.law.cornell.edu/wex/insider_trading
- yieldcrv 4y agoIt is contingent on having a fiduciary duty with the issuing organization, just like your own source says. For non-directors, this duty comes in the form of confidentiality agreements that are part of standard employment contracts (but can take any form, and the wording must be evaluated by the prosecutors independent of the action they wish to prosecute). Note, that it also relies on the thing being traded being a security. Which the DOJ here decided to avoid trying to figure out, by specifically not leveraging the insider trading fraud statutes. And therefore they stick with the super broad wire fraud statute, the fraud part being extended to the breach of fiduciary duty. They otherwise wouldn't have a tool to prosecute this action that.
- chrisco255 4y ago
- TrackerFF 4y agoWould be nice if they also went after all the wash trading.
- Saint_Genet 4y agoSo you’re saying he bathed apes?
- JohnJamesRambo 4y agoYou love to see it.
- twox2 4y agoNot really, they're making an example out of some guy that made an opportunistic bad decision, but meanwhile there are criminals defrauding people of a lot of money in the NFT space and are allowed to operate in the open.
- JohnJamesRambo 4y agoEvery one of the insider trading crypto guys just paid attention today. That’s a win for the little guys.
- hamiltonians 4y agodude should have done fake Saylor youtube livestreams instead. More $ and no arrests.
- hamiltonians 4y agolol took many years to arrest elizabeth holmes for a far, far bigger fraud. goes to show how when it comes to crime either go really big or not at all.
- danso 4y agoThis guy was noticed because tumbled crypto was sent back to his main and publicly known wallet. Obviously he did lots of other careless things (e.g. operate sock puppet accounts that did nothing but do early buys of OpenSea front page NFT). But couldn’t he have at least sent the money to other anonymous wallets and then cash out?
- parineum 4y ago> anonymous wallets and then cash out How do you stay anonymous and cash out?
- 2OEH8eoCRo0 4y agoImpossible. The information to identify you is out there- it's the hope that nobody will piece it together.
- siftrics 4y agoNo. The only information the blockchain would give you in the proposed "anonymous cash out" scenario is 1. Someone bought ETH on a CEX 2. They then transferred the ETH to a newly created wallet 3. They then did the mentioned NFT trades 4. They then transferred the money back to a CEX wallet Given only public information, there is no way to identify the individual. You have to have access to the CEX's (obviously) private database to know who purchased the original ETH and who transferred the arguably ill-gotten gains back to the exchange.
- 2OEH8eoCRo0 4y agoGiven only public information? Well in that case we are all anonymous. If you do illegal shenanigans you should assume all information can be used against you.
- wolongong942 4y agoDisagree, it should be doable.. - Fund your brand new eth account by swapping from XMR via a DEX - do the shenanigans - exit your ETH back into XMR via the DEX - do whatever with the XMR? Of course there's a lot more when it comes to metadata leakage and there is a lot to learn before you can use XMR with a high degree of privacy. You also have to remember that this guy was caught by fairly basic on-chain research by crypto Twitter so even some basic measures could have saved him, or could have prevented the charges which may not have been brought against him if it wasn't a slam-dunk case with such obvious evidence.
- chrisco255 4y agoClaims he is charged with insider trading but he's actually being charged with money laundering and wire fraud. There are no laws on the books against insider trading NFTs. Even the closest physical counterpart, art auctions, collectibles, etc have no such laws against using insider info to personal advantage. The charges in this case, seem egregious?
- ABeeSea 4y agoSeems that he defrauded his employer and employer’s customers. The original NFT owner should have gotten the profit from the front page listing. A physical analog would be an art rep for Sotheby’s directly buying a piece from a perspective seller and then auctioning the piece themselves through Sotheby’s through a third party to hide it from their employer.
- chrisco255 4y agoIf he was buying these NFTs they were already for sale on the open market. Most of these NFT sales are not auctions but direct, "buy it now" listings. A physical analog would be someone buying an obscure comic book series or packs of Yu-Gi-Oh cards before they got featured by a national expo or collectible marketplace. And then flipping them for a higher price after the hype train started.
- twox2 4y agoIs this a crime if you know ahead of time it's going to be listed?
- chrisco255 4y agoNo, and he's not being charged with "insider trading" (because it doesn't exist for art / collectibles). Typically any item that hits the OpenSea front page has already been listed (usually days or weeks later). The listing of the most popular NFTs occurs when their custom smart contract goes live on-chain, and is usually accompanied with a custom "mint" website. OpenSea automatically lists any ERC721 that gets created (although will sometimes manually de-list projects for copyright violations or other issues). He definitely took advantage of privileged information. He definitely should have been fired and fined. But these are not securities. NFT art drops do not have "earnings calls" and quarterly reports or anything of the sort. He was front running the boost in sales activity that occurs when a project gets featured on the front page of OpenSea.io. That's the extent of it.
- tyrfing 4y agoThat's an interesting case. It's basically a single wire fraud charge, with money laundering added on due to making new accounts to commit the alleged crime. There are recent developments in the area (Kelly and Blaszczak cases) but this probably isn't affected. The crime is using "confidential business information", recognized as a form of intangible property, for personal benefit; the victim is OpenSea. Since the resulting money wasn't taken from anyone, they are seeking forfeiture. It seems like this is somewhat related to a shift from insider trading prosecution to general criminal fraud statutes (insider trading as embezzlement.) Not a lawyer, would love to see analysis from someone who knows a bit more. https://www.yalelawjournal.org/pdf/130.Lustbader_r3uhyngc.pdf https://www.yalelawjournal.org/pdf/130.Lustbader_r3uhyngc.pd...
- encryptluks2 4y agoNot a lawyer, but from my perspective... if you're part of the club you can insider trade all you want. Just look at Nancy Pelosi. If you aren't part of the club, then they'll charge you for it.
- TaylorGood 4y agoSilly. He was the face/favorite/twitter voice of OpenSea during his employment there, and he blew it for what.. 18 ETH in "fast" gains?
- bparsons 4y agoIsn't insider trading the entire purpose of these exchanges?