For full text search please use the '?' prefix. e.g. ? Onboarding

Reading 2021-10-04

Metadata

  • Ref:: Hacker News
  • Title:: OpenSea Product Chief accused of fraud with NFT trading
  • Author::
  • Year of publication:: 2021
  • Category:: News
  • Topic:: #topic.cryptoasset

Notes from reading

Ref: comment

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.

Ref: comment

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

Ref: comment

While i vaguely agree, crypto/blockchain/whatever has one unique aspect that is "valuable": It creates a scarcity in an internet full of abundance. You can copy/paste a JPEG or MP3 a million times (hello piracy), but you can't own an NFT or coin you don't actually own. Sure, you can copy/paste the underlying JPEG, but thats not the same. There will only be 1 blockchain owner. This unique property of scarcity is a valuable property for financial products, in an obvious way. The issue is that an abundance of a scarce product is ripe for fraud. Oh, and of course there is no answer for the on-chain to in-IRL conversion for things like ownership.