At the world’s largest NFT marketplace, there have been thefts, fraud, and lawsuits.
One of the most well-known crypto startups, OpenSea, is facing backlash because nonfungible tokens were stolen and copied.
Chris Chapman used to own one of the most valuable things in the crypto world: a one-of-a-kind digital image of an ape in a spacesuit with spikey hair.
Mr. Chapman bought the non-transferable token last year, when the Bored Ape Yacht Club, a series of digital collectibles with a lot of hype, became a big deal. In December, he put his Bored Ape up for sale on OpenSea, the biggest NFT marketplace, and set the price at about $1 million. Two months later, as he was getting ready to take his daughters to the zoo, OpenSea told him that the ape had been sold for about $300,000.
Mr. Chapman, who runs a construction business in Texas, said that a crypto scammer took advantage of a flaw in OpenSea’s system to buy the ape for a lot less than it was worth. He said that OpenSea offered him about $30,000 in compensation last month, but he turned it down in order to try to get a bigger payment.
Mr. Chapman, 35, said that the company has made “a lot of stupid, dumb mistakes.” “They really don’t know what they are doing.”
Mr. Chapman is one of many crypto fans who have asked questions about OpenSea, a site similar to eBay where people can look through millions of NFTs, buy images of them, and sell their own. In the past 18 months, OpenSea has become the most popular NFT marketplace and one of the most well-known crypto start-ups. Investors have given the company more than $400 million, giving it a staggering $13.3 billion value, and it has hired executives from tech giants like Meta and Lyft.
But as OpenSea grew, it became harder and harder to stop theft and fraud. The mistake that cost Mr. Chapman his ape has been talked about for months, and the start-up has had to pay out more than $6 million to NFT traders because of it.
Customers also say that OpenSea takes too long to stop the sale of NFTs that hackers have stolen and then sold on to make quick money. And there is a lot of stolen art on the site, which upsets artists who used to see NFTs as a way to make money. At least four traders have filed lawsuits against the company, and this month, one of its former executives was indicted on charges of insider trading with NFTs.
OpenSea’s problems are getting worse at the same time that demand for NFTs is falling because cryptocurrency prices are falling. The industry data tracker NonFungible says that sales of NFTs have dropped by about 90% since September. OpenSea also has to deal with competition from newer marketplaces built by well-known crypto companies like Coinbase.
The fights between the company and its users show some of the main problems with web3, a utopian vision of a more democratic internet run by regular people instead of big tech companies. Like many other crypto platforms, OpenSea doesn’t ask most of its customers for their names and markets itself as a “self-serve” gateway to a market with few rules. But users want the company to act more like a traditional business by giving money to people who have been scammed and getting tough on theft.