Original title: "Thefts, Fraud and Lawsuits at the World’s Biggest NFT Marketplace》

Originally by David Yaffe-Bellany, The New York Times

Original compilation: Biscuit, chain catcher

Original compilation: Biscuit, chain catcher

OpenSea, one of the highest-profile cryptocurrency startups, is facing allegations of NFT misappropriation and plagiarism.

The Boring Apes Yacht Club has grown into a phenomenal digital collectible. Chapman bought this NFT last year. In December, he listed it for about $1 million on OpenSea, the largest NFT marketplace. Two months later, when he was about to take his daughters to the zoo, OpenSea sent him a notice: This NFT had been sold for about $300,000.

Chapman, who runs a construction business in Texas, said a cryptocurrency scammer took advantage of a flaw in OpenSea's system to buy the Boring Ape NFT for a fraction of the price. Last month, he said, he rejected an offer of about $30,000 in damages from OpenSea, hoping to negotiate a larger payout. Chapman, 35, thinks OpenSea makes "a lot of stupid mistakes, they really don't know what they're doing."

Chapman is one of many crypto enthusiasts who have expressed doubts about OpenSea. OpenSea is an eBay-like website where people can browse millions of NFTs or complete NFT trading activities. Over the past 18 months, OpenSea has become a major NFT marketplace and one of the most high-profile crypto startups. The company has raised more than $400 million from investors at a staggering $13.3 billion valuation and has hired executives from tech giants like Meta and Lyft.

As OpenSea has grown, it has worked hard to prevent things like theft and fraud. Chapman’s Boring Ape NFT misselling incident led to months of mutual accusations between OpenSea and users, and the startup paid more than $6 million in compensation to all NFT traders.

Users have also complained that OpenSea is slow in preventing NFT transactions from being hacked, allowing hackers to make quick profits through unrestricted trading of stolen goods. Meanwhile, plagiarized works have proliferated on the site, angering artists who once viewed NFTs as a financial lifeline. The company faces at least four lawsuits from traders, and this month a former executive was indicted for insider trading involving NFTs.

OpenSea's troubles are mounting at a time when cryptocurrency prices are plunging and demand for NFTs is cooling. According to data from industry data tracker NonFungible, the transaction value of NFT has dropped by about 90% since September. At the same time, OpenSea is also competing with the emerging NFT market established by well-known encryption companies such as Coinbase.

OpenSea's conflict with users illustrates some of the central contradictions of Web3, and even a more democratic Web3 network controlled by ordinary people rather than big tech companies is still only a utopian vision. Like many crypto platforms, OpenSea does not collect the names of most of its users and markets itself as a "self-service" portal to decentralized marketplaces. But users increasingly want the decentralized company to compensate victims and fight theft in the same way traditional businesses do.

"Like every tech company, there comes a time when you're playing catch-up," said OpenSea CEO Devin Finzer, 31. "You're doing everything you can to accommodate the new users that are coming into the space."

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Alex Atallah (left) and Devin Finzer built OpenSea. Image via Getty Images

OpenSea was founded four and a half years ago by Brown University graduates Finzer and Alex Atallah. Finzer previously founded a personal finance app that was acquired by fintech firm Credit Karma. Atallah worked as a software engineer at Palantir. They are now among the richest crypto billionaires in the world, according to Forbes.

OpenSea's business model is simple. Every time a user sells an NFT on its platform, OpenSea will take a 2.5% commission. The platform saw a surge in business last year as NFTs became a cultural craze. Almost overnight, OpenSea went from a humble start-up to one of the most powerful intermediaries in the crypto industry, and it quickly caused a lot of questions.

"It's very difficult for any company to adjust and adapt to this kind of growth so quickly," said Carrie Pressley, who worked at OpenSea for several months last year. "It was a very chaotic period."

Since OpenSea collects a fee from each NFT transaction, some users believe that the company is responsible for cracking down on the trading of stolen NFTs on the platform. This year, Nevada-based investor Robert Armijo sued OpenSea for failing to prevent his stolen NFTs from being sold on the platform. (OpenSea’s lawyers called the complaint “meritless” and said the company would act quickly to prevent other stolen NFTs from being sold.)

In February, former OpenSea technical director Eli Shapira clicked on a link through which hackers gained access to his digital wallet storing NFTs. Hackers sold two of Shapira's most valuable NFTs on OpenSea for more than $100,000.

Within hours, Shapira reached out to OpenSea and reported the hack. But the company never took action, he said. Since then, he's been using a blockchain explorer to track down accounts for its NFTs, and has seen hackers sell other NFTs on OpenSea, possibly from other thefts.

"It's very easy for these hackers to go and open an account there and immediately trade or sell whatever they've stolen," Shapira said. "All users need to tighten their security measures."

Last month, after The New York Times asked OpenSea about the case, the company responded to Shapira and froze transactions of the stolen NFTs.

Anne Fauvre-Willis, who runs OpenSea's customer support efforts, said the company has worked hard to improve response times when users report theft. "Speed ​​is important," she said, "and it's something we're investing in today and will continue to invest heavily in in the future."

Cases of NFT plagiarism on OpenSea have also surged as sellers convert traditional artwork into NFTs and sell the NFTs without compensating the original creators.

DeviantArt, a collaborative artist community owned by web development company Wix, runs software that scans millions of NFTs per day to detect plagiarized NFTs from its artists. The community found more than 290,000 instances of plagiarism on OpenSea and other NFT marketplaces.

"There's hardly any accountability," says Liat Karpel Gurwicz, DeviantArt's chief marketing officer.

OpenSea provides a tool that allows users to create NFTs in just a few clicks, converting regular images into unique NFT items whose authenticity is recorded on a public blockchain. In January, the company said it would limit the number of NFTs users can make with the tool. But after a backlash from NFT fans, OpenSea reversed course and said in a tweet that the cap would be removed, even though many of the new creations have proven to be "plagiarized works, fake collectibles, and spam."

"They've conflated the idea of ​​NFTs and piracy," said Aja Trier, a Texas-based artist whose work has been copied and sold on OpenSea. "It's diluting the market for my work."

In May, OpenSea announced it was using image recognition technology to fight plagiarism. But the scanning service is limited to comparing newly uploaded NFTs to those listed on OpenSea, so the tool is unlikely to detect plagiarized NFT artwork from other sites.

Former college basketball player Chapman began experimenting with cryptocurrencies last year. He bought a Boring Ape NFT for a few hundred dollars, which he later traded in for this Boring Ape NFT in astronaut gear because it reminded him of his hometown of Houston’s space-age past. Then he started wearing Boring Ape sweatshirts, and his mother-in-law bought him a Boring Ape water bottle.

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Bored ape in astronaut suit

Last September, Chapman listed the Boring Ape NFT on OpenSea, setting the price at 90 ETH. Three months later, he raised the price to 269 ETH, or about $1.1 million. At that time, the value of Bored Ape NFT was soaring. Chapman plans to sell that NFT at the right price in order to immediately buy another, less valuable Boring Ape NFT and take a cut of the profits from the transaction.

In February of this year, the NFT was finally sold for 90 ETH, or about $300,000. Savvy arbitrageurs took advantage of an OpenSea vulnerability that allowed them to trade NFTs on OpenSea for expired pending orders.

On February 18, Finzer announced that OpenSea had updated its technology to prevent thieves from reactivating expired order listings. The company compensated some victims and required them to sign non-disclosure agreements.

OpenSea initially reimbursed him only a 2.5 percent fee for selling Boring Apes, Chapman said. Last month, after his lawyer wrote to OpenSea, OpenSea raised the offer to 15 ETH, which is slightly less than $30,000 even at today's ETH prices. OpenSea declined to comment on Chapman's case.

Chapman insisted on greater damages. As the owner of the Bored Ape NFT, he is entitled to an airdrop of ApeCoin tokens, a cryptocurrency launched in March. At the time, each Boring Ape NFT owner received over $100,000 worth of ApeCoin tokens.

Because Chapman accidentally lost the Boring Ape NFT, he missed the windfall ApeCoin, which he originally planned to use to buy a house near his wife’s home in the Houston suburbs.