The arrest heard ’round the crypto world

Welcome to Chain Reaction.

We talked last week about $4.5 billion in new funds. Everyone in the NFT space is sweating bullets because of the arrest.

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crimes of the future

Over the past couple years, the space has been moving so fast that builders seem to think existing rules don't apply to them. After years of legal action, it seems the U.S. prosecutors are ready to challenge that perception.

The US Attorney's Office in the Southern District of New York arrested and charged a former OpenSea executive who used his position to front-run NFT projects that were going to be listed on the home page of the marketplace. He was discovered by members of the community who tracked his activities.

I would have liked to rant on this during the show, but news broke while we were recording, so I will leave you with some thoughts here.

The arrest was a huge shock to people in the NFT space who were used to seeing unethical behavior from people in the space. This is a frame that was held by many including the man who fired him.

I think there was a mistake in the way it was portrayed. NFTs are not viewed as financial assets by us. It is a very specific term for a very specific thing.

Former OpenSea exec arrested and charged with insider trading of NFTs

A lot of people are taking a very close reading of the SDNY press release, which charges Chastain with wire fraud and money laundered in connection with a scheme to commit insider trading. Later in the release, NFTs are described as "digital assets". The case is being handled by the Office's Securities and Commodities Fraud Task Force.

NFTs should be classified as securities. It would raise the barrier of entry for creation of NFTs and curtail a lot of the experimentation happening in the space if NFTs were subjected to securities law.

Many people have been doing illegal things for a long time if NFTs are treated as securities.

The NFT space did not have any regulation coming down on it. There is a fear that more regulation could be on the way as NFT volumes start to slow.

the latest pod

We are giving you a preview of the latest episode of Chain Reaction, where we discuss the latest web3 news, block-by-block.

One of the most anxiety-inducing aspects of corporate life is the performance review. The crypto exchange is trying to emulate Ray Dalio's hedge fund by allowing employees to give each other feedback and ratings in real time. Is this part of tech's descent into a real world? Listen to what we have to say.

The OnlyFans founder and CEO left the company after trying to ban sexually explicit content from the platform, and the architect of the stable coin, Terra, also left the company.

Ty Haney was our guest this week and she talked about her new venture, Try Your Best, as well as her previous ventures. The startup just got its second round of funding.

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follow the money

The place where startup money is moving.

1. New York-based enterprise blockchain startup Digital Asset took in a strategic investment of undisclosed size from Japanese banking giant SBI Holdings.
2. InfStones, a blockchain infrastructure provider, nabbed $66 million in a round led by SoftBank and GGV.
3. Indian music NFT startup FanTiger bagged $5.5 million for its seed round led by Multicoin Capital.
4. LivingCities, a metaverse-focused social startup co-founded by Foursquare founder Dennis Crowley, banked $4 million in early funding led by DCVC.
5. Zimbabwe’s FlexID received an undisclosed amount of funding from Algorand for its blockchain-based identity system for the underbanked.
6. Web3 augmented reality gaming company Jadu raised $36 million in funding for its Series A led by Bain Capital Crypto.
7. VillageStudio raised $2.3 million in an Animoca Brands-led round for its NFT-based Playken avatars.
8. Web3 payments API Merge got $9.5 million in seed funding led by Octopus Ventures.
9. GoSats, an India-based bitcoin rewards platform, raised $4 million in a pre-Series A funding round from investors including Y Combinator, Accel and Gossamer Capital.
10. DAO management platform Utopia Labs closed a $23 million Series A led by Paradigm.

Foursquare founder banks funding for mystery 3D social network startup

the week in web3

Our team members in the U.S. took some time to enjoy the long weekend. Big personality made waves in the space for better and for worse.

• OnlyFans founder Tim Stokely is pivoting to crypto after leaving the company last December following controversy over his push to ban sexually explicit content from the platform. Anita wrote about the new “family-friendly” NFT startup he’s launching alongside another former OnlyFans exec that will allow people to buy, sell and trade virtual cards featuring influencers and celebrities.
• NFT platform OpenSea had fired Nate Chastain, its head of product, back in September after he was accused of front-running trades on the platform. Now, he’s been arrested and charged with insider trading; Lucas has the details.

OnlyFans founder makes crypto debut selling influencer trading cards

added analysis

Some of this week's analysis can be found on our subscription service.

Many investors are still bullish despite the fall in VC funding.

There has been a decrease in VC funding in the last month, but investors are not worried. Stan Miroshnik is a partner and co- founder of 10T. Miroshnik said that VCs will still have a robust amount of activity despite the fact that the pace of capital deployment may be more measured. SaurabhSharma, head of investments at JumpCrypto, said that even though there might be a gloomy sentiment in digital asset markets, they will still invest heavily.