Chris Chapman owned one of the most valuable commodities in the crypto world: a unique digital image of a spiky-haired monkey in a space suit.
Chapman bought the non-fungible token last year as a widely publicized digital collectibles series called Bored Ape Yacht Club became a phenomenon. In December, he listed his Bored Ape on OpenSea, the largest NFT marketplace, pricing the price at around $1 million. Two months later, as he was about to take his daughters to the zoo, OpenSea sent him a notification: the monkey had been sold for around $300,000.
A crypto scammer exploited a loophole in OpenSea’s system to buy the monkey for far less than its worth, said Chapman, who runs a construction company in Texas. Last month, OpenSea offered him about $30,000 in compensation, he said, which he declined in hopes of negotiating a larger payout.
The company made “a lot of dumb, stupid mistakes,” said Chapman, 35. “They don’t really know what they’re doing.”
Chapman is one of many crypto enthusiasts who have raised questions about OpenSea, an eBay-like site where people can browse millions of NFTs, buy the images, and put their own up for sale. Over the past 18 months, OpenSea has become the dominant NFT marketplace and one of the hottest crypto startups. The company has raised more than $400 million from investors, valuing it at $13.3 billion, and has recruited executives from tech giants like Meta and Lyft.
But as OpenSea has grown, it has struggled to prevent theft and fraud. The issue that cost Chapman his monkey led to months of recriminations, forcing the startup to issue more than $6 million in payouts to NFT traders.
Customers also complain that OpenSea is slow to block the sale of NFTs seized by hackers, who can make a quick profit by returning the stolen goods. And plagiarized art has proliferated on the site, outraging artists who once viewed NFTs as a financial lifeline. The company faces at least four lawsuits from traders, and one of its former executives was indicted this month on charges related to insider trading involving NFTs.
OpenSea’s troubles are piling up just as demand for NFT cools amid a cryptocurrency price crash. NFT sales have fallen about 90% since September, according to industry data tracker NonFungible. OpenSea also faces competition from new markets built by established crypto companies like Coinbase.
The company’s clashes with users illustrate some of the central tensions of web3, a utopian vision of a more democratic internet controlled by ordinary people rather than giant tech companies. Like many crypto platforms, OpenSea does not collect the names of most of its customers and presents itself as a “self-service” gateway to a loosely regulated market. But users increasingly want the company to act more like a traditional business by compensating victims of fraud and cracking down on theft.
In three interviews, OpenSea executives acknowledged the scale of the issues and said the company was taking steps to improve trust and security. OpenSea, which is based in New York, has hired more customer service staff, aiming to respond to all complaints within 24 hours. The company freezes lists of stolen NFTs and has a new filtering process to prevent plagiarized content from circulating on the platform.
“Like any technology company, there is a period when you catch up,” said Devin Finzer, 31, CEO of OpenSea. “You try to do everything you can to accommodate the newest users coming into space.”
OpenSea was founded 4½ years ago by Finzer, a Brown University graduate whose previous startup, a personal finance app, was sold to financial technology company Credit Karma, and Alex Atallah, a former engineer from the software company Palantir. They are now among the richest crypto billionaires in the world, according to Forbes.
Their business model is simple. OpenSea takes a 2.5% cut every time an NFT is sold on its platform. Last year, business soared as NFTs became a cultural sensation and the value of bitcoin and other cryptocurrencies skyrocketed.
Virtually overnight, OpenSea grew from an obscure startup to one of the most powerful intermediaries in the crypto industry, which quickly led to trouble.
“It would be difficult for any company to pivot and adapt to this kind of increase so quickly,” said Carrie Presley, who worked for OpenSea for a few months last year. “It was very chaotic.”
Since OpenSea collects a fee on every NFT sale, some users claim the company has a financial incentive not to crack down on the sale of stolen goods. This year, Robert Armijo, a Nevada investor, sued OpenSea for failing to stop a hacker who stole several of his NFTs from selling one on the platform. (OpenSea’s attorneys called the suit a “non-starter” and said the company acted quickly to prevent the remaining stolen NFTs from being sold.)
In February, Eli Shapira, a former tech executive, clicked on a link he believed gave a hacker access to the digital wallet where he stores his NFTs. The thief sold two of Shapira’s most valuable NFTs on OpenSea for a total of over $100,000.
Within hours, Shapira contacted OpenSea to report the hack. But the company never acted, he said. Since then, he has used public data to track the account that grabbed his NFTs and saw the hacker selling more images on OpenSea, possibly from more flights.
“It’s very easy for these hackers to go open an account there and immediately trade or sell whatever they stole,” Shapira said. “All these guys need to step up security.”
Last month, after The New York Times asked OpenSea about the case, the company responded to Shapira and froze any future sales of the stolen NFTs.
Anne Fauvre-Willis, who oversees OpenSea’s customer support efforts, said the company has worked to improve response times when users report thefts.
“It’s important to be faster,” she said. “It’s something we’re investing in today and will continue to invest heavily in the future.”
OpenSea has also seen a surge in plagiarism, as sellers convert traditional artwork to NFT and then list images for sale without compensating the original creator.
DeviantArt, an artist collective owned by web development company Wix, runs software that scans millions of NFTs every day to detect plagiarized images from its artists’ work. The program has identified over 290,000 instances of plagiarism across OpenSea and other NFT marketplaces.
“There’s almost no kind of accountability,” said Liat Karpel Gurwicz, DeviantArt’s chief marketing officer.
OpenSea offers a tool that allows users to create NFTs with just a few clicks, by converting regular images into unique items whose authenticity is recorded on a public ledger called blockchain. In January, the company announced that it would limit the number of NFTs users could perform with the tool. But after a backlash from NFT fans, OpenSea reversed course and said in a tweet that it would remove the cap, even though many of the new creations turned out to be “plagiarized works, fake collections and spam”.
“They bastardized the concept of what NFTs were supposed to be,” said Aja Trier, an artist from Texas whose work has been copied and sold on OpenSea. “It dilutes the market for my work.”
In May, OpenSea announced that it was using image recognition technology to fight plagiarism. But the scanning service only compares newly uploaded images with other NFTs listed on OpenSea, making it unlikely to detect plagiarized artwork from other websites.
Shiva Rajaraman, a former VP of Meta and Spotify who works on OpenSea’s product team, said the company hopes to expand its plagiarism net. “We will work on partnerships with other people to get this original work done,” he said.
Chapman, a former college basketball player, started experimenting with crypto last year. He bought a Bored Ape for a few hundred dollars, and then traded it in for the monkey in astronaut gear because it evoked the space-age history of his hometown of Houston. He started wearing a Bored Ape sweatshirt and his stepmother bought him an Ape brand water bottle.
In September, Chapman listed his space monkey on OpenSea, setting the price at 90 Ether. Three months later, he raised the price to 269 Ether, or around $1.1 million, in line with the skyrocketing value of other Bored Ape NFTs. He planned to sell the NFT enough that he could immediately buy another less valuable Space Monkey and pocket the profits from the trade.
In February, the monkey sold for the original listing for 90 Ether, or around $300,000. Savvy traders had exploited a glitch that allowed them to activate outdated auction listings on OpenSea.
On February 18, Finzer announced that OpenSea had updated its technology to prevent thieves from reactivating old listings. The company reimbursed some victims, asking them to sign non-disclosure agreements in exchange for payments.
Chapman said OpenSea initially offered him a refund of just 2.5% of the fees he received when selling his space ape. Last month, he said, OpenSea upped its offering to 15 Ether, or just under $30,000 at today’s prices, after his lawyer wrote to the company. OpenSea declined to comment on its case.
Chapman is expecting a larger refund. As the owner of a Bored Ape NFT, he would have been entitled to a large share of ApeCoin, a cryptocurrency that was launched in March. Ape NFT owners each received a piece of coins worth over $100,000 at the time.
Because he had lost his monkey, Chapman missed out on his anticipated windfall of ApeCoin, which he planned to use to buy a house near his wife’s family outside of downtown Houston.
“I could have the ApeCoin right now and have a down payment for my house,” he said. “It’s all gone.”
This article originally appeared in The New York Times.