Chris Chapman owned one of the most valuable commodities in the world of cryptocurrencies. It’s a unique digital image of ape with pointed hair in a spacesuit.
Chapman bought a non-fungible token last year as a series of widely-promoted digital collections called the Bored Ape Yacht Club became a phenomenon. In December, he launched Bored Ape on OpenSea, the largest NFT marketplace, and set the price at around $ 1 million. Two months later, OpenSea sent him a notice when he was ready to take his daughters to the zoo. Apes sold for about $ 300,000.
According to Chapman, a construction company in Texas, crypto scammers exploited flaws in OpenSea’s system to buy apes at prices significantly lower than their value. Last month, OpenSea offered him about $ 30,000 indemnity, he said, which declined in the hope that he would negotiate a larger payment.
The company “made many stupid and stupid mistakes,” Chapman, 35, said. “They really don’t know what they are doing.”
Chapman is one of many crypto enthusiasts asking about OpenSea, a site like eBay where people can browse millions of NFTs, buy images, and sell their images for sale. .. In the last 18 months, OpenSea has become a major NFT marketplace and one of the most well-known cryptocurrency startups. The company raised more than $ 400 million from investors, valued it as an astonishing $ 13.3 billion, and hired executives from major tech companies such as Meta and Lyft.
However, as OpenSea has grown, it has struggled to prevent theft and fraud. Glitch, who sacrificed Chapman’s apes, has been blamed for months, forcing startups to pay NFT traders more than $ 6 million.
Customers have also complained that OpenSea is slow to block the sale of NFTs seized by hackers. Hackers can quickly make a profit by turning over stolen goods. Also, plagiarized art has skyrocketed on the site, offending artists who once saw NFTs as an economic lifeline. The company has faced at least four proceedings from traders, and one of its former executives was charged this month with charges related to insider trading, including NFTs.
Just as demand for NFTs cools as cryptocurrency prices plummet, OpenSea’s problems are piled up. According to industry data tracker Non Fungible, NFT sales have fallen by about 90% since September. OpenSea is also competing with new marketplaces built by established crypto companies such as Coinbase.
Clashes with the company’s users show some of the core tensions in web3. This is a more democratic utopian vision of the Internet, controlled by the general public rather than by giant tech companies. Like many crypto platforms, OpenSea does not collect the names of most customers and advertises itself as a “self-service” gateway to loosely regulated markets. However, users are increasingly hoping that companies will behave like traditional businesses by compensating for victims of fraud and cracking down on theft.
In three interviews, OpenSea executives acknowledged the scale of the problem and stated that the company is taking steps to improve credibility and safety. Based in New York, OpenSea employs more customer service staff to respond to all complaints within 24 hours. The company has a new screening process to freeze the list of plagiarized NFTs and prevent plagiarized content from circulating on the platform.
“Like all tech companies, there’s a time to catch up,” said Devin Finzer, 31, CEO of OpenSea. “You are trying to do everything you can to accommodate the brand new users coming to your space.”
OpenSea was founded by Finzer, who graduated from Brown University four and a half years ago. Earlier startups, personal finance apps, were sold to financial technology company Credit Karma and former engineer of software company Palantir Alex Atallah. According to Forbes, they are currently one of the wealthiest cryptocurrencies in the world.
Their business model is simple. OpenSea offers a 2.5% reduction each time an NFT is sold on the platform. Last year, business surged as NFTs created a cultural sensation and the value of Bitcoin and other cryptocurrencies soared.
Virtually overnight, OpenSea quickly became one of the strongest intermediaries in the crypto industry from an ambiguous startup, causing problems.
“It will be difficult for any company to respond quickly to this type of growth,” said Carrie Presley, who worked at OpenSea for several months last year. “It was very chaotic.”
Since OpenSea collects a fee for each NFT sale, some users claim that they have a financial incentive not to limit the sale of stolen goods. This year, Nevada investor Robert Armijo sued OpenSea for failing to prevent hackers who stole some of the NFTs from selling one of them on the platform. (OpenSea lawyers called the complaint “not a beginner” and said the company acted swiftly to stop the sale of other stolen NFTs.)
In February, former tech executive Eli Shapira clicked on a link stating that hackers had access to a digital wallet that stores NFTs. The thief sold Shapira’s two most valuable NFTs at OpenSea for a total of over $ 100,000.
Within hours, Shapira contacted OpenSea and reported the hack. But he said the company never took action. Since then, he has used public data to track accounts that have seized NFTs and have seen hackers selling other images on OpenSea.
“It’s very easy for these hackers to go there, open an account, and immediately trade or sell what they stole,” says Shapira. “All these people need to be more secure.”
After the New York Times asked OpenSea about the incident last month, the company responded to Shapira and frozen future sales of stolen NFTs.
Anne Fauvre-Willis, who oversees OpenSea’s customer support efforts, said she has been working to improve response times when users report theft.
“It’s important to be fast,” she said. “That’s what we’re investing in today, and we’ll continue to invest huge amounts of money.”
OpenSea is also seeing a surge in plagiarism as sellers convert traditional artwork to NFTs and list images for sale without compensation to the original author.
DeviantArt, a group of artists owned by web development company Wix, runs software that scans millions of NFTs every day to detect stolen images from the artist’s work. The program has identified more than 290,000 cases of plagiarism in OpenSea and other NFT marketplaces.
Liat Karpel Gurwicz, Chief Marketing Officer of DeviantArt, said:
OpenSea provides a tool that allows you to create NFTs with just a few clicks, transforming regular images into reliable and unique items recorded in a public ledger called a blockchain. In January, the company announced that it would limit the number of NFTs users could create using the tool. However, in response to backlash from NFT fans, OpenSea reversed the course, and despite tweeting that many of the new works were “plagiarized, fake collections, and spam.” Said to lose.
“They have ridiculed the notion of what an NFT should be,” said Aja Trier, a Texas artist who was copied and sold at OpenSea. “It dilutes the market for my work.”
In May, OpenSea announced that it was using image recognition technology to crack down on plagiarism. However, the scanning service only compares newly uploaded images with other NFTs listed in OpenSea, so it rarely detects artwork stolen from other websites.
Shiva Rajaraman, former vice president of Metaand Spotify, who works for the OpenSea product team, said the company wants to expand its anti-plagiarism drugnet. “We work in partnerships with other people and get their original work,” he said.
Former college basketball player Chapman began experimenting with cryptocurrencies last year. He bought a boring ape for hundreds of dollars and later evoked the space age history of his hometown of Houston, so he replaced it with an astronaut’s equipment. He started wearing Bored Ape sweatshirts and his mother-in-law bought him an Ape branded water bottle.
In September, Chapman posted his Space Ape on OpenSea and set the price at 90 Ether. Three months later, he raised his price to 269 Ether, or about $ 1.1 million, in line with the soaring value of other Bored Ape NFTs. He planned to buy another low-value space ape right away and sell enough of the NFT so that he could put the profits from the deal in his pocket.
In February, apes were sold for the original list of 90 Ether, or around $ 300,000. Familiar traders have abused glitches that allow OpenSea to activate old sales lists.
On February 18, Finzer announced that OpenSea has updated its technology to prevent thieves from reactivating old lists. The company refunded some victims and asked them to sign a nondisclosure agreement in exchange for the payment.
According to Chapman, OpenSea initially offered him a refund of the 2.5% fee he received when Space Ape was sold. He said OpenSea increased its offer to 15 Ether, or just under $ 30,000 today, after his lawyer wrote to the company last month. OpenSea refused to comment on his case.
Chapman is withholding a larger redemption. As the owner of the Bored Ape NFT, he was entitled to receive most of the cryptocurrency ApeCoin launched in March. Each Ape NFT owner received a chunk of coins worth more than $ 100,000 at that time.
Having lost an ape, Chapman missed the expected ape wind and rain that he was planning to use to buy a home near his wife’s family outside downtown Houston.
“I now have an ApeCoin and may have a down payment for my house,” he said. “It’s all gone.”
This article was originally published in The New York Times.