The OpenSea scandal can teach us a lot about blockchain scams

OpenSea’s insider trading scandal exposed the risks of blockchain technology, but also highlights its strengths.

Dr. Merav Ozair, a blockchain expert and fintech professor at Rutgers Business School, finds it “amusing” when people think criminals would flock to the blockchain.

The OpenSea scandal can teach us a lot about blockchain scams

A recent NFT scandal illustrates why.

The backstory

Last week, Twitter sleuths accused Nate Chastain, then-head of product at OpenSea, of using secret wallets to buy specific NFTs right before they were featured on the digital marketplace’s homepage.

In essence, the claim is that he was using insider info to turn a bigger profit.

OpenSea later released a statement confirming there’d been an investigation and that an employee had resigned.

The sleuths used the blockchain’s very trackable transactions

“Every transaction, once it’s recorded on the blockchain, nothing can be changed or deleted. It just lives there forever,” Ozair told The Hustle.

Because NFTs are minted on Ethereum, a public blockchain, transactions related to particular NFTs can be tracked, too.

The 1 thing you can’t see is an account holder’s identity, but…

… that doesn’t stop the FBI. With serious crimes, like ransomware hacks, the FBI works with companies that specialize in tracking down bad actors with algorithms — a process Ozair said is often faster than if someone used cash.

Should OpenSea users still trust the platform?

Ozair thinks so.

“You can be scammed on any platform… but finding the scammers on the blockchain is much easier, so you shouldn’t fear too much,” Ozair said.

OpenSea also announced 2 new policies for its employees, which Ozair compares to the policies many companies have regarding insider trading on the stock market:

  • They can’t buy or sell from currently featured collections or creators
  • They can’t use confidential info to buy or sell any NFTs — whether they’re on OpenSea or not

In related news: OpenSea also launched an app, but for browsing only, possibly to avoid Apple and Google’s commission fees (which we covered here).

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