OpenSea NFT insider trading indictment and how a startup can help your company not be next
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CHICAGO - illiNews -- On Wednesday, June 1st, a former OpenSea product manager was arrested on one count of wire fraud and one count of money laundering. The Justice Department filed charges for the first time on "insider trading" as this employee was allegedly buying NFTs before they hit the main page of OpenSea and then flipping them for profit. The defendant has pleaded not guilty to trading 45 NFTs on 11 occasions.

There are tools on the market that could have helped OpenSea prevent this situation. Most of these tools are commonplace in deFi and crypto exchanges such as TRM Labs and Elliptic's product suites. It is likely that OpenSea uses tools like these, but the tools alone are not a panacea for risk elimination. These tools and other risk management tools must be implemented comprehensively and based on the unique risks of each organization. They must also be complemented with useful policies and procedures so that when the tools help identify suspicious activity, it is promptly investigated and handled. Many companies have serious blind spots when it comes to risks like what OpenSea is facing, especially in the rapidly emerging blockchain technology space. These blind spots can have significant to catastrophic impacts on companies.

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This is where a new startup is coming on the scene. Decise (https://decise.io/) is a Chicago-based blockchain compliance consulting and services firm. The founders have an extensive history in tech, compliance, audit, management consulting, and innovation. They are enthusiasts of all things blockchain. Their mission is to help protect blockchain companies and consumers with the right level of compliance to properly nurture innovation and growth while preventing catastrophic negative impacts. Decise helps companies identify their blindspots, create a more robust picture of their threat landscape, and then helps them either select and implement compliance tools or fine-tune their existing toolsets. They support companies in implementing or revamping their policies and procedures and even provide Compliance-as-a-Service offerings for companies that are wanting an outsourced solution.

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The OpenSea situation was likely avoidable. Based on the indictment filing, the employee was allegedly using multiple new wallets that were not hosted by entities with established Know Your Customer (KYC) practices. The implementation of wallet and transaction screening both before and after listing NFTs would have likely flagged this issue. With effective policies and procedures, it is probable that OpenSea could have caught the issue and handled it internally. This may be OpenSea's blind spot, but in the rapid evolution of blockchain business models, most companies have blind spots. Startups such as Decise are emerging to help companies uncover and mitigate these blind spots to protect businesses and consumers, ultimately nurturing blockchain innovation.