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Opensea NFT marketplace Accuses Senior Employee of Insider Trading

Opensea, the world’s largest NFT marketplace, has announced that one of its senior employees is guilty of insider trading, using internal information to profit big on nonfungible tokens.

The popular marketplace stated that Nate Chastain, the head of product at Opensea, used internal information to purchase NFTs that was about to be featured on the company’s homepage and likely to spike in value.

On Wednesday, September 15, OpenSea CEO Devin Finzer tweeted: “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. This is incredibly disappointing. We want to be clear that this behaviour does not represent our values as a team. We are taking this very seriously and are conducting an immediate and thorough review of this incident so that we have a full understanding of the facts and additional steps we need to take.”

Opensea is investigating Chastain’s secret dealing after the accusations were made against him last night when community members publicly accused the employee of buying NFTs set to be displayed on the company’s website front page before their public listing.

Yesterday, a Twitter user named ‘ZuwuTV’ highlighted a tweet stating that Chastain operated “secret wallets” that purchased the platform’s front page NFTs before they were “featured,” and later selling them for a profit once the price spike because of their exposure.

Other Twitter users also accused Chastain of using a secret Ethereum wallet to snap up the site’s front page NFTs before their public release.

Some users mentioned a tweet by Chastain in August in which he appeared to admit that he bought an NFT by the Artist Arya Mularama ahead of the public listing. “I just wanted to get one of these before they all disappeared tbh,” Chastain tweeted during that time.

Using tools like Twitter’s advanced search function and Wayback Machine, ZuwuTV and other users showed that Chastain likely purchased NFTs that are set to be featured NFTs on the OpenSea website.

Seven months ago, Chastain bought CryptoPunk #3501 for 26.98 Ether (worth $92,000 at today’s prices), according to Opensea data. Since this NFT identified his Ethereum address, users were able to follow the money trail flowing into Chastain’s publicly known account, as the Ethereum blockchain transparently and permanently records all transactions on a public ledger.

Opensea has therefore introduced new policies stating that team members are now disallowed from buying or selling from collections. At the same time, they are being promoted or featured on the company’s homepage and not allowed to use confidential information to buy or sell NFTs, whether available on the company’s platform or not.

Rising Demand for NFTs

Built in 2017, Opensea is the largest peer-to-peer marketplace for crypto assets (nonfungible tokens), collectables, gaming items, and other assets backed by a blockchain. The firm is operating in a brand-new market but growing rapidly. The company has had over $200 million in trading volume in its platform since launch and over 12 million assets listed on the marketplace.

In August, Opensea recorded a $3.4 billion transaction volume on Ethereum, more than ten times the figure in July.

Data indicate unprecedented interests in NFTs – digital assets that can represent items that range from virtual real estate, video files to artwork. The rising demand and media attention have pushed the prices of NFT collections, and buying frenzy of such digital assets has also increased the prices of Solana and Ether and other smart contracts blockchains where nonfungible tokens can be created.

Telos Launches Most Powerful EVM And Combats Insider Trading in Crypto Market

Many people were over-excited when the news about Ethereum 2.0 broke out. However, the upgraded system to the already existing Ethereum blockchain has not fixed issues associated with transactions, scalability, and sustainability.

Ethereum 2.0 has left a major common problem, “front-running,” which crypto investors are still facing. This problem continues causing the loss of thousands of dollars and other more losses.

Investors are now joyous with the news that Telos, a popular third-generation blockchain, announced its EMV, which is described as having the capability to solve the front-running problem and many more. Therefore, it is important to examine how Telos solves this problem and outperform other systems.

Telos EVM

Telos EVM (Ethereum Virtual Machine) is a compatible layer-one blockchain that offers a scalable solution to run existing solidity applications and vyper contracts without modifications.

Telos EVM was built to revolutionize the DeFi landscape and to fix problems faced by other EVMs. Each part of Telos appears to solve different problems commonly witnessed in other networks. Telos EVM just functions like Ethereum but is different from the original EVM. The platform was developed to host a number of large programs from other networks without modifying anything.

Tackling Front-running Problem

Ethereum miners mainly use front-running to improve their spread while entering options and futures contracts.

However, front-running is a common problem in the crypto industry. This problem causes millions of dollars to drain in trading, and many users lose millions of dollars even without knowing.

The front-running problem occurs when bots or miners with insider knowledge about pending trades make a profit from it. Bots could offer a high gas fee to jump lines over high-value transactions, and even miners take bribes or insert their own transactions to get transactions directly.

The involved person can skip lines, complete transactions, and even differentiate between his purchase and sell price as profit. While the attacker is the only one making a profit from this, other general users do not benefit.

Telos solves this problem by having a strict anti-front running rule and a fixed transaction fee. This prevents any possibility for attackers to exploit users. At every second, Telos creates two blocks with a fixed gas fee on EVM transactions. Since EVM is fast, bots have no chance to scan pools for high trades. Moreover, Telos offers rules in that nobody can break these rules. Telos offers transaction processing on a FIFO basis (first-in, first-out); hence block producers cannot reorder any transactions to gain high profits.

Fixing Transaction Issues

Another important area where Telos is seen solving a significant problem – the transaction fee concern.

Telos has advanced features such as cost-efficient transactions, fast block times, and fair distribution that significantly benefit developers.

While only a few platforms can boast of offering low transaction fees, native Telos has no fee at all. Telos EVM, which uses the similar gas model used by the original Ethereum, costs $0.01. Telos EVM helps people save thousands of dollars since Ethereum’s gas fees are relatively high. With that in mind, Telos outperforms its competitors such as Cardano, Polkadot, and others and beats the original Ethereum down.

The time it takes to mine one block varies typically based on the chain and particular variables. There are various blockchains in the market with a high market cap, such as Ethereum, Cardano, Polkadot, and Tezos. And all these cryptocurrencies have a prominent position on the market.

Ethereum is popular and considered the king of decentralized apps. It has scalability problems and typically takes 10 – 15 seconds to mine one block. Polkadot has not yet launched the Parachains upgrade, allowing individual sidechains to hook on the main blockchain. On the other hand, Cardano recently launched smart contracts. Tezos most projects are still in development, but it can lend well to DeFi and NFTs.

Though such blockchains still boast of offering faster transactions, they still cannot rival Telos EVM. The time which Telos EVM takes to mine one block is less than 500ms. Such a fantastic time block means that Telos can handle 10,000 transactions per second. Telos, therefore, fixes the gap seen in the problem associated with transaction speed.

Harnessing Interoperability

Telos is considered the greenest blockchain due to its low energy consumption levels. It also provides a home to several dApps on its network.

Telos EVM makes it easy for developers to bring existing applications to the Telos blockchain. It is compatible with Vyper, EOSIO C++, and Solidity, providing a new experience for migrating users. The compatibility rate of Telos EVM with other apps is 95% and therefore makes migration much more accessible. With EOSIO, developers can migrate applications from the EOS blockchain to Telos, and for maximum performance, coders will be able to deploy Ethereum DApps on Eosio.

Apart from that, Telos recently announced partnerships with Anyswap, SushiSwap, and a popular NFT project, Cryptopunks. So, users on such platforms can take advantage of Telos EVM’s security, speed, and scalability with trading their crypto coins.

Telos Gains Popularity

Telos’s functionality to migrate applications from EOS blockchain has gained attention from big brands such Siemens, Zalando, Cisco, and Microsoft. These are just part of the big brand’s names using Telos blockchain to unlock real-world activities and build applications. A powerful hackathon platform known as Taikai uses Telos for open innovation events in the next generation. Telos uses a combination of the best of various ecosystems and successfully other benefits on top.

Telos, with its powerful enhancements, solves the weaknesses that other blockchains cannot solve. It will evolve governance solutions, provide network scalability, flexible and low fee models, and no front-running. Telos has become the web 3.0 stack and provides entrepreneurs and developers tools to succeed in the next-generation decentralized internet economy.

Ex-Coinbase Staff Sued in Insider Trading Case

Ishan Wahi, 32, the former Product Manager at Nasdaq-listed trading platform Coinbase Global Inc has been charged to court and was presented to the United States District Court for the Western District of Washington for allegedly being the mastermind of an insider trading fraud.

According to details disclosed by the Department of Justice (DoJ), Ishan, who in his position where he was privy to knowledge of the potential coins that were to be listed on Coinbase, sold the information to his brother, Nikhil Wahi, and his associate Sameer Ramani.

With the shared information, the three men acquired the potential coins billed for listing, an action they performed up to 14 times to accrue as much as $1.4 million in profit from at least June 2021 to April this year. The scheme was blown when a Twitter user flagged a massive early accumulation of a coin that Coinbase announced it plans to list in one of such trades.

The investigation eventually pointed to Ishan when he was invited to a panel by Coinbase’s director of security operations. This invitation pushed Ishan to attempt to run to India, but law enforcement apprehended him before leaving.

“Today’s charges are a further reminder that Web3 is not a law-free zone,” said U.S. Attorney Damian Williams, “Just last month, I announced the first-ever insider trading case involving NFTs, and today I announce the first ever insider trading case involving cryptocurrency markets. Our message with these charges is clear: fraud is a fraud, whether it occurs on the blockchain or on Wall Street. And the Southern District of New York will continue relentlessly bringing fraudsters to justice, wherever we may find them.”

The DoJ and FBI are proactive in terms of bringing offenders in the digital currency ecosystem to book. Prior to this insider trading arraignment which is the first of its kind in the industry, the FBI also spearheaded the investigation into the first-ever insider trading connected with the NFT marketplace, OpenSea, back in June.

First Jury Hearing in OpenSea Insider Trading Case

On April 24th, the Southern District Court of New York held the first jury hearing in the case against former OpenSea product manager Nathaniel Chastain. Chastain is facing two counts of wire fraud and money laundering, with allegations of insider trading with non-fungible tokens (NFTs). The case has garnered attention from the cryptocurrency and legal communities alike, as it may have a significant impact on the legal classification of NFTs.

The allegations against Chastain were filed by the U.S. Manhattan Attorney’s Office on May 31st, 2022. The prosecution claims that Chastain used his insider knowledge to secretly purchase 45 NFTs just before their listing and sold them immediately afterward for a profit. One such example cited in the filing was the case of NFT “The Brawl 2.” Chastain allegedly bought four of these NFTs “minutes before” they were featured on OpenSea and sold them within hours for a 100% profit.

Chastain’s defense attempted to remove the “insider trading” references from his charges, arguing that the term only applies to securities and not to NFTs. However, prosecutors noted that the allegation of insider trading can be used to reference multiple types of fraud in which someone with non-public knowledge uses it to trade assets. The use of the term “insider trading” to describe NFT-related charges is a new development, and the outcome of the trial may have implications for the legal classification of NFTs.

If the case against Chastain results in a conviction for insider trading, it could set a precedent for similar charges in the future, potentially leading to NFTs being classified as securities. Alma Angotti, a former U.S. Securities and Exchange Commission (SEC) lawyer, predicted this outcome in 2022, citing the Howey test, which determines whether a financial instrument is a security. Another former SEC employee, Philip Moustakis, expressed a similar concern, stating that “if this case sticks, there is precedent that insider trading theory can be applied to any asset class.”

In another recent court case, cryptocurrency exchange Coinbase supported a motion to dismiss insider trading charges against the brother of the platform’s former product manager. The defense argued that the SEC had no jurisdiction to file a lawsuit because the tokens in question did not pass the Howey test. This case highlights the uncertainty surrounding the legal classification of NFTs and the potential impact of Chastain’s trial on the industry as a whole.

The trial is expected to last several weeks, and its outcome may have far-reaching consequences for the NFT market. The case has drawn attention to the need for clear regulations surrounding NFTs and cryptocurrency in general. The outcome of this case could set a precedent for the legal classification of NFTs and have a significant impact on the future of the industry.

Former Coinbase Employee Sentenced

On May 9th, 2023, a federal judge in the United States District Court for the Southern District of New York sentenced Ishan Wahi, a former product manager at Coinbase Global, to 24 months in prison for insider trading. Wahi had used confidential information he obtained during his time working at Coinbase to profit off new listings of tokens, totaling up to $1.5 million.

The judge, Loretta Preska, sentenced Wahi to two years in prison and ordered him to surrender by June 21st at 2:00 PM ET to serve his sentence at the Fort Dix Federal Correctional Institution in New Jersey. After his time in prison, he will be subject to two years of supervised release for each count, running concurrently.

During the hearing, Judge Preska addressed Wahi and said, “You spoke very nicely, you said all the right things. I hope that you can make this up to your parents.” Wahi’s counsel argued that the judge should consider his immigration status in the United States, that this was a non-violent offense, and that he had “zero criminal history” prior to his arrest.

However, Judge Preska held Wahi responsible for his actions and stated that insider trading is a serious offense that undermines the integrity of the market. Wahi’s insider trading not only harmed Coinbase but also put investors’ interests at risk.

Wahi was not acting alone in his insider trading scheme. Along with his brother Nikhil Wahi and associate Sameer Ramani, Wahi allegedly used confidential information from Coinbase to profit off new listings of tokens, totaling more than $1 million. U.S. authorities arrested Ishan and Nikhil in July 2022 as they were attempting to flee the country to travel to India.

Wahi’s sentencing has come as a warning to those who use insider information to their advantage in the market. Insider trading is a violation of securities laws that undermines the integrity of the market and harms the interests of investors.

Coinbase, one of the world’s largest cryptocurrency exchanges, is dedicated to protecting its investors’ interests and ensuring the integrity of its platform. The company has implemented strict policies and procedures to prevent insider trading, including monitoring employee activity and imposing consequences for violations.

Wahi’s sentencing has also raised concerns about the potential for insider trading in the cryptocurrency market. Cryptocurrency markets are largely unregulated, making them vulnerable to manipulation and insider trading. As cryptocurrency continues to gain mainstream adoption, regulatory authorities will need to implement measures to prevent insider trading and ensure market integrity.

In conclusion, Wahi’s sentencing serves as a reminder that insider trading is a serious offense that will not be tolerated in any market. The integrity of the market is essential for investors’ trust and confidence, and regulatory authorities must take necessary measures to ensure market integrity. Coinbase, as one of the largest cryptocurrency exchanges in the world, will continue to prioritize the protection of its investors’ interests and maintain the integrity of its platform.

Former Coinbase Product Manager Sentenced to Prison for Insider Trading Scheme

In a recent hearing in the United States District Court for the Southern District of New York, Judge Loretta Preska sentenced Ishan Wahi to two years in prison for his involvement in an insider trading scheme that had rocked the cryptocurrency industry. Wahi had worked as a product manager at Coinbase and was accused of using confidential information to profit off new token listings.

Wahi’s insider trading scheme allegedly involved using confidential information he obtained from Coinbase to purchase tokens before they were publicly available, allowing him to sell them at a higher price once they were listed. Along with his brother Nikhil Wahi and associate Sameer Ramani, Wahi allegedly profited off new token listings, totaling more than $1 million.

Authorities arrested Ishan and Nikhil Wahi in July 2022 as they were attempting to flee the country to travel to India. The two brothers were charged with securities fraud, wire fraud, and obstruction of justice.

During the hearing, Wahi’s counsel argued that the judge should consider his immigration status in the United States, that this was a non-violent offense, and that he had “zero criminal history” prior to his arrest. However, Judge Preska held Wahi responsible for his actions and sentenced him to two years in prison.

Insider trading is a serious offense that undermines the integrity of the market and harms the interests of investors. Cryptocurrency markets are largely unregulated, making them vulnerable to manipulation and insider trading. As cryptocurrency continues to gain mainstream adoption, regulatory authorities will need to implement measures to prevent insider trading and ensure market integrity.

In conclusion, Ishan Wahi’s sentencing serves as a warning to those who use insider information to their advantage in the market. Insider trading is a serious offense that will not be tolerated in any market, and those who engage in such behavior will be held accountable for their actions. Regulatory authorities must take necessary measures to prevent insider trading and ensure market integrity, and Coinbase will continue to prioritize the protection of its investors’ interests and maintain the integrity of its platform.

Over Half of Crypto Token Listings Show Signs of Insider Trading, Reveals Solidus

In an eye-opening study, Solidus, a leading crypto market integrity platform, has uncovered signs of insider trading associated with more than half of all cryptocurrency token listings since 2021. The firm’s analysis indicates a persistent issue within the industry, yet one that can be effectively tackled with the right measures.

Solidus’ HALO platform has detected signs of insider trading on Decentralized Exchanges (DEXs) linked to 56% of all ERC-20 token listing announcements on numerous key crypto exchanges since January 2021. The platform has identified over 100 suspected insiders involved in more than 400 instances of insider trading.

Serial insider trading represents the most prevalent form of this activity, with specific entities repeatedly engaging in these transactions. Solidus’ data shows that 51 individual or linked cryptocurrency wallets have been flagged for utilizing decentralized exchanges to purchase upcoming tokens listed, often swapping Ether, Tether, or USD Coin to acquire these tokens on multiple occasions. Ten of these entities have displayed trading patterns that coincide closely with over 10 token listing announcements. Even more concerning, the three most active insiders have traded prior to over 25 listing announcements each.

Here is a summary of Solidus’ findings:

ERC-20 token listing announcements: 234
ERC-20 token listings with insider activity: 131
Percentage of listings with insider activity: 56%
Number of insider trading events: 411
Number of distinct insiders: 105
Number of distinct one-time insiders: 54
Number of distinct serial insiders (≥2 listings): 51
Number of distinct serial insiders (>10 listings): 10
Number of distinct serial insiders (>25 listings): 3
Average number of insiders per listing with insider activity: 3.14

The findings paint a concerning picture of the current state of the cryptocurrency market, pointing to the need for increased scrutiny and regulation. The revelations call for an industry-wide commitment to transparency and ethical trading practices to ensure the continued growth and trust in cryptocurrency markets.

Korean Prosecution Investigates Cypto Coin WEMIX Issuer WeMade and Hyperism Simultaneously

The Korean prosecution has simultaneously raided WeMade, the issuer of the cryptocurrency WEMIX, and Hyperism, the asset management company responsible for WEMIX’s market making. This incident comes right after South Korea’s parliament passed the Virtual Asset Protection Act, which aims to crack down on illegal illegal trading practices such as market price manipulation and insider trading.

The raid was conducted at the headquarters of Hyperism, located in Gwanak-gu, Seoul. An official from Hyperism confirmed that the prosecution was conducting a search in relation to WEMIX. The office was tightly sealed, with both the front glass door and the external iron door firmly closed.

The Financial Investigation Department 1 of the Seoul Southern District Prosecutor’s Office initiated the search at WeMade’s headquarters in Bundang-gu, Seongnam-si, Gyeonggi-do. The investigation also extended to the market makers of WEMIX.

Previously, WEMIX investors had filed a complaint against Hyun-guk Jang, the representative of WeMade, accusing him of fraud and fraudulent unfair trading under the Capital Market Act on May 12.

In 2021, WeMade had invested in Hyperism through its blockchain-specialized subsidiary, WeMade Tree. It was reported that WeMade had invested KRW 5.2 billion from the funds raised from the sale of WEMIX, and subsequently paid 18 million WEMIX to the Hyperism Eco Fund.

Former OpenSea Head of Product, Nathaniel Chastain, Sentenced in Pioneering NFT Insider Trading Case

Nathaniel Chastain, the former head of product at OpenSea, has been sentenced to three months in prison for his involvement in insider trading with digital assets. Chastain was responsible for selecting which NFTs would be featured prominently on OpenSea’s platform. He was convicted of “fraud and money laundering” in May, with potential penalties of up to 20 years for each charge.

The U.S. Department of Justice and the FBI charged Chastain with generating over $50,000 in illicit profits from NFT trades. This case was highlighted as the first insider trading scheme involving digital assets. Insider trading is deemed illegal when individuals leverage non-public information for personal gain, thereby prioritizing their profits over obligations to their employer or the general public.

Legal representatives for Chastain argued that NFTs, unique digital tokens often representing ownership of digital art, are not securities. They further contended that the information Chastain used was not confidential. However, the court was not swayed by these arguments and allowed the case to proceed to trial.

Chastain’s illicit activities came to light after his departure from OpenSea in 2021. The company had asked for his resignation following an internal investigation that found he had breached his obligations to the OpenSea community. As a consequence of his conviction, Chastain forfeited his equity in OpenSea, which, according to his lawyers, was valued in the millions.

To facilitate his insider trading activities, Chastain created multiple digital wallets and OpenSea accounts. However, his actions did not go unnoticed, with the Crypto Twitter community highlighting his misconduct. Before his charges, Twitter users identified “burner” wallets linked to Chastain, where Ethereum from NFT sales was funneled back to his primary wallet.

In the evolving landscape of the crypto and digital assets market, insider trading has become a growing concern, especially given the less stringent regulations compared to traditional finance. Ishan Wahi, once a product manager at Coinbase Global, Inc., faced the consequences of such actions. On May 9, 2023, U.S. District Judge Loretta A. Preska sentenced him to two years in prison for leaking confidential business information about forthcoming Coinbase crypto asset listings to his brother and a friend. This privileged information allowed them to execute profitable trades before Coinbase’s official announcements. Wahi had earlier confessed to two counts of conspiracy to commit wire fraud. In the aftermath, the Securities and Exchange Commission launched separate civil proceedings against him.

Washington D.C. Attorney Faces SEC Insider Trading Charges

Romero Cabral da Costa Neto, a visiting attorney at a renowned global law firm, has been thrust into the spotlight following insider trading charges announced by the Securities and Exchange Commission (SEC). This incident, coupled with a recent case in the digital asset market, underscores the evolving challenges of insider trading in both traditional and modern financial landscapes.

Romero Cabral da Costa Neto’s Alleged Misconduct

According to the SEC’s complaint, in 2023, Costa accessed confidential information about the biopharmaceutical company Swedish Orphan Biovitrum AB’s acquisition of CTI BioPharma Corp. (CTIC). On May 9, 2023, a day before the deal’s public announcement, Costa allegedly purchased over 10,000 shares of CTIC. He is accused of selling these shares on the announcement day, realizing a profit exceeding $42,000. The SEC alleges that Costa’s trading activities extended to securities of several other issuers represented by the law firm, closely timed with their significant announcements.

Nicholas P. Grippo, Regional Director of the Philadelphia Regional Office, remarked, “As alleged in our complaint, Costa violated his duties to the law firm and its clients when he abused his position to enrich himself.” The case, originating from the SEC’s Market Abuse Unit’s Analysis and Detection Center, has also led to parallel criminal charges against Costa by the U.S. Attorney’s Office for the District of Columbia.

Insider Trading Across Financial Realms

Insider trading is not an uncommon illegal financial misconduct, evident not only in traditional finance but also in the emerging crypto market. Nathaniel Chastain, the former head of product at OpenSea, was recently sentenced to three months in prison for insider trading involving Non-Fungible Tokens (NFTs). Chastain, responsible for selecting NFTs to be featured on OpenSea’s platform, was convicted of “fraud and money laundering” earlier this year. The U.S. Department of Justice and the FBI highlighted this case as the pioneering insider trading scheme involving digital assets.

Chastain’s activities were unveiled post his 2021 departure from OpenSea. An internal investigation led to his resignation, and following his conviction, Chastain forfeited equity in OpenSea, reportedly valued in the millions.

Conclusion

The cases of Costa and Chastain serve as a stark reminder of the complexities and challenges posed by insider trading in both traditional securities and the burgeoning digital asset markets. As financial landscapes evolve, the need for stringent regulations and oversight remains paramount.