[HN Gopher] OpenSea product chief accused of flipping NFTs with ...
___________________________________________________________________
OpenSea product chief accused of flipping NFTs with insider
information
Author : jbegley
Score : 70 points
Date : 2021-09-15 20:33 UTC (2 hours ago)
(HTM) web link (www.theverge.com)
(TXT) w3m dump (www.theverge.com)
| d--b wrote:
| Anyone knows the legality of this? NFTs aren't regulated, right?
| And OpenSea isn't legally bound to act on its clients best
| interests?
| dcolkitt wrote:
| Not against the law at all. If market manipulation and insider
| trading of art was illegal half the gallery owners, collectors
| and critics in New York and London would be in jail.
|
| Bad look for OpenSeas and unethical? Sure.
| space_rock wrote:
| You can't rig an auction. That's illegal. eBay can't trade in
| it's own items to get the prices higher
| [deleted]
| mekkkkkk wrote:
| Anyone surprised by this must be living under a rock. NFTs and
| crypto in general has turned into mostly an unregulated
| playground for market manipulation.
|
| It's sad to see these fantastic technologies falling into
| darkness. Same can be said about the majority of the internet and
| its phenomenon to be honest.
| space_rock wrote:
| I was agreeing with you until you said fantastic technology.
| Crypto has always involved outrageous fraudulent claims about
| the technology in its sales pitches. The technology they sell
| does not exist. Decentralised trading is still incomplete
| research. It's vaporware
| brightball wrote:
| Just validates that the entire NFT concept is as ridiculous as it
| sounds.
| ryanSrich wrote:
| How does potential insider trading in any way validate NFTs
| being ridiculous?
| dreyfan wrote:
| Because it's all a sham and the monetary success of a
| particular drop is contingent upon how well it's advertised.
| By knowing when and what drops would be featured, that was
| the information asymmetry he was exploiting. There is nothing
| fundamentally useful about a single NFT so far. It's all
| speculative bullshit in every sense of the imagination. This
| is just the ICO scams of 2019 regurgitated [1].
|
| [1] https://en.wikipedia.org/wiki/Greater_fool_theory
| vkou wrote:
| > There is nothing fundamentally useful about a single NFT
| so far.
|
| If NFTs were useful, they'd be securities, and would be
| regulated by the SEC.
|
| The entire point of NFTs is that they are naked, useless,
| purely speculative instruments. It's a big blackjack table,
| except unlike in Vegas, the house has an edge.
| SkyMarshal wrote:
| Most NFTs are technologically uninteresting for one reason or
| another.
|
| Either the actual art exists off-chain somewhere and there's
| just a hash of it onchain, which the "owner" controls with
| the private key of the transaction or contract the hash is
| in. But the art can still be copy-pasted all over the
| Internet and the only way to prevent rando's from using it
| for free is with traditional copyright law, so it's not
| actually decentralized.
|
| Or the art itself is onchain but it's just some avatar
| manually drawn in Microsoft Paint (cryptopunks I'm looking at
| you) and not pseudo-randomly procedurally generated in the
| smart contract or anything technologically novel and notable
| like that.
|
| The concept of NFTs is interesting and may lead to something
| truly cool someday, but most of the implementations right now
| are trash.
| dcolkitt wrote:
| Don't you remember that time someone got caught insider
| trading stocks and it made everyone realize that the joint
| stock corporation was a bad idea.
| iblaine wrote:
| Reminds me of a situation where I worked at an affiliate network
| that tracked ads and commissions. Adsense was relatively new back
| then and I figured out how to match impressions to clicks to
| AdWords keywords to sales. You could approximate the ROI/click
| for keywords on Google and to some extent SEO. The reaction from
| upper management was excitement then fear that the tool would get
| out, which it eventually did. Surely this will be a learning
| experience for OpenSea. It does happen. Here's another example.
| [1]
|
| [1]
| https://www.theatlantic.com/business/archive/2015/10/draftki...
| Animats wrote:
| Not clear whether this is even illegal, though. As long as they
| refer to existing objects, they're not securities, and since
| they're all different, they're not commodities. So they escape
| both SEC and CFTC regulation in the US. (The UK's Financial
| Conduct Authority, though...) That's the whole point of NFTs.
|
| In 2019-2020, the SEC cracked down on Initial Coin Offerings.
| They grandfathered in the early coins, and shut down some out and
| out scams. Then the SEC started sending out letters, "explain to
| us why your ICO isn't a security offering requiring registration
| as an IPO". Suddenly there was a huge drop in ICOs.
|
| So then came NFTs, which looked like they were going to evade
| regulation. Then some of the NFT issuers started making NFTs
| which looked like IPOs. Selling land in virtual worlds that don't
| exist yet, for example. That's a no-no. That passes the Howey
| Test - value paid into a common enterprise, with the expectation
| of future gains, to be derived from the efforts of others. That's
| the definition of an investment in the US. If the value of an NFT
| depends on the _future_ efforts of the organization involved with
| the NFT, it 's a security.
|
| That doesn't quite seem to be the case here, though. It's legal,
| and fairly common, for an art dealer to front-run artworks or
| have shill buyers. You're supposed to know what the art is worth.
|
| Selling NFTs in bulk, though, might start to look like a security
| for regulation purposes. Selling fractional shares in NFTs
| definitely is. The SEC is working on a guidance memo. If you're
| starting up an NFT, you definitely need some time with a
| securities lawyer. Remember, the whole point of most NFTs is to
| try to evade securities regulation. That comes with serious legal
| risks.
|
| [1] https://www.howeycoins.com
| space_rock wrote:
| Can eBay pump up the price of it's own items with fake trading
| bots? No that's fraud. There are laws around auctions and
| trading. I'm guessing it's illegal
| Y_Y wrote:
| What does "refer to existing objects" mean? Are these any
| better than baseball cards or top trumps?
| vkou wrote:
| I don't think 'refer to existing objects' is the meaningful
| bit, here. You can print and sell and trade and auction
| baseball cards of players that don't exist, and they'll still
| be regulated the same way as baseball cards of players who
| do. (Which is to say, not at all.)
|
| I think the meaningful bit is whether or not an NFT is a
| baseball card, or ownership of... Some yet to be generated
| value, somehow derived from a baseball card.
|
| The latter is obviously a security, the former is, to my
| layman eyes, probably not.
|
| Continuing on this train of thought, it should be worth
| noting that useless things (Ownership of a baseball cards)
| are not regulated, but useful things (Ownership of a stake in
| the value generated by a baseball card) are regulated.
|
| It makes sense, in a perverse way - if someone wants to spend
| their money on a useless thing, that's on them. If someone
| wants to spend their money on a useful thing, then, well, the
| buyer should expect some assurance that they are not being
| completely lied to and swindled. (Which is why the SEC
| regulates securities markets, and not art auctions.)
| [deleted]
| HashThis wrote:
| This makes OpenSea corrupt.
| qeternity wrote:
| The entire crypto world is like this.
|
| MtGox pumping and wash trading with Willy bot. Bitmex trading
| against and liquidating customers. Coinbase hiring Litecoin
| creator Charlie Lee and having him frequently wash trading 99% of
| LTC volume. Each of these has been _the_ preeminent exchange at
| some point in time, just as OpenSea is for NFT.
|
| FTX was born from one of if not the largest crypto trader/market
| maker, and one of two known Tether customers (who apparently
| account for a large majority of Tethers). Alameda was the
| only/largest liquidity provider on FTX for some time. Binance has
| been similarly accused (without solid proof) of trading against
| customers. Of course they claim to have walls between these
| relationships. But then again, so did Mt Gox, Bitmex, Coinbase,
| OpenSea and loads of others that would take too long to mention.
|
| Crypto is a casino where there are a handful of dealers that are
| running thousands of tables. They are all colluding. The grift is
| to exchange real fiat currency for chips at their casino.
|
| It has been proven at a shocking number of blue chip institutions
| (dare I say a majority). Given our expected likelihood of
| uncovering these things, it seems highly probable that it's
| happening everywhere.
| felixbraun wrote:
| IMO people overestimate how much alpha is in knowing your
| customer's positions (as exchange owner).
|
| Open interest, volume and price data down to seconds is
| available via APIs in real-time, from which it is absolutely
| possible to build a model of positioning.
|
| If you launch a new exchange, your biggest problem is lack of
| liquidity, meaning user's limit positions won't fill 'timely'
| and market orders slip, which is very bad UX obviously.
|
| That is why it is fairly obvious that one of the best market
| makers in the industry launched their own exchange; Alameda
| could provide excellent liquidity from day one for FTX, which
| was ultimately what led to their success in a very competitive
| environment.
| thebean11 wrote:
| I wonder if this is actually unique to crypto, or if it's
| common in any industry where participants have a massive
| financial incentive to "cheat"? There's plenty of instances of
| hedge funds and stock traders acting like this. I bet there
| would be more if they were under as little regulation as the
| crypto exchanges..
| qeternity wrote:
| Well, I spent most of my career as a hedge fund trader so I
| can also comment on this: of course everyone is looking for
| the upper hand and people will bend or break rules to achieve
| this. But this is universal to all games, and fundamentally
| the game is fair.
|
| In crypto, the game is not fair. The refs are players and
| there are no rules.
| thebean11 wrote:
| Could you be more specific about what makes crypto less
| fair than the other markets hedge funds trade in?
| qeternity wrote:
| Read my original comment. For all of the Occupy Wall
| Street rhetoric, overwhelming majority of people in
| finance are law abiding participants. That's not to say
| that they're particularly moral or honest people. But in
| regulated markets, regulators seek to make rule breaking
| a negative EV outcome, so rule following becomes the
| logical behavior for a self interested actor. Regulators
| might not always succeed, but it still shifts the outcome
| distribution massively.
|
| In crypto, the opposite is true. Because there are no
| penalties, otherwise malicious behavior is encouraged.
| First and foremost: exchanges trading against customers.
| This would never be allowed in a regulated market, just
| like we would never allow judges to wager on the cases
| over which they preside. It creates a horrible conflict
| of interest. But in crypto, conflicts of interest are the
| most successful business models (across a load of
| projects).
|
| Crypto is mostly regulatory arbitrage. I'll be the first
| to change my mind when the facts change, and maybe I'm
| just not as visionary as every other lambo hopeful. But
| as it stands today, this is the reality.
| thebean11 wrote:
| Let's say hypothetically all financial regulation is
| lifted tomorrow, I have a hard time believing the current
| "honest" participants won't have a similar free for all.
|
| We may be saying the same thing: the difference is the
| regulation, not the moral character of participants.
| geofft wrote:
| But the _entire_ value proposition of cryptocurrency is
| how difficult it is to regulate via traditional law
| enforcement mechanisms.
|
| Which can be used for good, of course - the standard
| example being things like "transferring money across
| immoral embargoes". But in this case, if the difference
| is regulation, then the question for ordinary folks who
| are not themselves trying to pull a scam is - would you
| rather work with dishonest con men who believe they will
| get in trouble with law enforcement if they actually con
| you, or with dishonest con men who believe they can get
| away with it?
| bko wrote:
| > This transparency has historically allowed users to protect the
| community by uncovering elaborate scams, such as when
| "cybersleuth" Fedor Linnik discovered that the team behind a
| million-dollar "female-led" project was actually Russian men.
|
| This made my chuckle. The article that it links to was aptly
| titled "This $1.5 million 'women-led' NFT project was actually
| run by Russian dudes" [0]
|
| Since so much is driven by identity, is there a service where you
| can rent out front people to "lead" the team that check the right
| boxes? Kind of like the those ghost board members that sit on
| thousands of board of directors on Cayman Islands shell corps and
| just do what management says?
|
| [0] https://www.inputmag.com/culture/fame-lady-squad-nft-
| women-m...
| rchaud wrote:
| > Since so much is driven by identity, is there a service where
| you can rent out front people to "lead" the team that check the
| right boxes?
|
| Like much of modern crypto-centric products, this is a solution
| in search of a problem. People are accustomed to going in
| headfirst without knowing who is behind these projects. It's
| 'decentralized' and features 'smart contracts' for 'trustless
| commerce'. What more do you need?
| vkou wrote:
| > Since so much is driven by identity, is there a service where
| you can rent out front people to "lead" the team that check the
| right boxes?
|
| Yes, it's called stock photography. Buy a couple of pictures of
| smiling people from a peddler of it, and stick them on your
| website's 'About Us' section.
| aresant wrote:
| The NFT community has been processing this news by changing their
| Twitter handles to Nate's with his imagined excuses and
| explanations ->
|
| https://twitter.com/BoredPimp/status/1437989964680032264
|
| https://twitter.com/nogoodlogan/status/1438014313722040322
|
| https://twitter.com/Milkman2228/status/1437971018950250499
| chejazi wrote:
| Oh man. This level of shame for someone not used to it (e.g.
| not a public figure) will certainly lead to some trauma.
| space_rock wrote:
| Criminals and scammers are not normally the sensitive types
___________________________________________________________________
(page generated 2021-09-15 23:00 UTC)