The rise and fall of NFTs made and unmade OpenSea — the largest marketplace for the crypto asset. But insider accounts of the company reveal a chaotic work environment, ever-shifting priorities, and troubles with the SEC.
In April, on an overcast spring afternoon, I attended the seventh iteration of NFT.NYC, a haven for all believers in monkey JPEGs with a price tag and other NFTs. As rain pelted the Javits Center, the “Super Bowl of NFTs” felt abandoned.
“The amount of people here is definitely reduced from last year,” Ric Johnson, who was promoting an NFT that let people vote on whether Donald Trump should go to prison, politely told me. Big Mac, an attendee who only gave me his online pseudonym (crypto has a strong culture of anonymity), said that instead of the NFT “Super Bowl,” the conference felt more like the “preseason.” And Tom Smith, who was manning a booth that hawked NFTs of anthropomorphized cannabis plants, was even more direct: “It seems really freakin’ dead.”
OpenSea, arguably the best-known company in the industry, was one of the conference’s sponsors, but Devin Finzer, the 33-year-old cofounder and current CEO, was nowhere to be seen. Alex Atallah, the cofounder of OpenSea who has since distanced himself from the startup, did appear on the main stage during one of the first sessions, only he didn’t want to talk about the very technology that made him and Finzer on-paper billionaires twice over. Instead, he mostly spoke about AI.
Cryptocurrency values may be back up, but one hyped storyline from the last crypto craze hasn’t recovered: the NFT. In January 2022, the total monthly sales volume for the asset class peaked at more than $6 billion, per CryptoSlam. Now, it’s below $430 million as of July. NFTs are hanging on, but they’re in troubled waters. “My mom thinks I’m a scam artist,” I overheard one conference attendee say.
At OpenSea, once the largest marketplace for NFTs, more storms have gathered. One of the most valuable private startups to come out of the incubator Y Combinator is now facing pending litigation from the Securities and Exchange Commission, a previously unreported “matter” with the Federal Trade Commission, inbounds from US and international tax authorities, heightened competition, accusations of gender discrimination, and employee attrition.
Interviews with 18 current and former employees, as well as internal company documents and conversations with investors, artists, and other stakeholders in the NFT industry, illustrate how a startup inspired by cat JPEGs has morphed into what one former staffer called a “lite” version of Meta that seems lost between the cultures of Big Tech and crypto.
Finzer once pitched OpenSea as a port of entry to a vast new internet. But now that the NFT high tide has receded, that pitch seems shallow.
In 2017, Finzer, then in his mid-20s, teamed up with Atallah, a Stanford graduate and another 20-something in the tech industry, to launch a startup. Originally, Finzer and Atallah planned to pay people to share their Wi-Fi with strangers with cryptocurrency, and in January 2018, they won entry into Y Combinator, the famed incubator that has produced tech behemoths like Airbnb.
That was also when blockchains, or decentralized databases that no one person controls, saw another wave of hype, and developers were popularizing a new way of permanently storing data onto said blockchains. These tokens were “non-fungible,” meaning they weren’t all the same, like a Bitcoin. In other words, NFT holders could brag they were the true owners of a single cartoon ape, according to an entry in an unchangeable database.
Industry boosters say the tokens can represent pretty much anything: housing deeds; patents; contracts; rights to virtual real estate. But in late 2017, a company called Dapper Labs popularized a use that appealed to the layperson: CryptoKitties, a game where users can buy and sell cartoons of cats on Ethereum, one of the most popular blockchains.
Cats weren’t the only JPEGs flying across what some proclaim is the next iteration of the internet. There were also CryptoPunks, pixelated pictures of characters wearing mohawks and sunglasses; digital trading cards inspired by Pepe the Frog, a meme with its own winding (and, at times, racist) history; and EtherTulips, or virtual tulips that, ahem, fight each other.
Finzer and Atallah noticed the hype and decided to pivot. “They were very ambitious,” John Caraballo, a contractor they hired for three months to write some of the initial code for OpenSea’s website, told me. “What they were building was very cutting edge, and nobody had done it before.”
In May, after they graduated from a Y Combinator class that included projects like weed-infused soda and VR-based psychotherapy, Finzer and Atallah announced $2 million in funds raised for their NFT marketplace — with backing from established investors like Peter Thiel’s Founders Fund.
“Entire economies will emerge that look very different than even our wildest imaginations — and we want to help enable them,” wrote Finzer in a blog post announcing the raise. “Things are just starting to get exciting…”
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For almost three years, the NFT industry was not exciting. OpenSea only had a few hundred daily traders using its platform throughout 2020, per data from DappRadar, and less than 10 employees, according to a former employee.
(Joshua Galper, a spokesperson for OpenSea, said tens of thousands of people per week used OpenSea’s website in mid-2020.)
“Their whole life was OpenSea,” the same employee told me of other team members, including Finzer and Atallah. “It [was] really fun, but also very rigorous, very intense.”
Then, in March 2021, the NFT market heated up. Mike Winkelmann, the artist better known as Beeple, auctioned off an NFT worth $69 million, and OpenSea saw the value of NFTs sold on its platform more than triple from the month prior, per DappRadar.
OpenSea can take up to a 10 percent cut from every sale, and the increased revenue led to increased investor appetite. That same month, Finzer announced that OpenSea had raised $23 million at a $123 million valuation from funders, including venture capital titan Andreessen Horowitz. OpenSea was more relevant than ever, and the company started expanding. “It was just a lot of craziness,” one former employee told me. “And we were all wearing a lot of hats.”
The NFTs kept coming. After the mammoth sale of Beeple’s artwork, a company called Yuga Labs released Bored Ape Yacht Club, a collection of 10,000 cartoon apes whose holders were promised exclusive events, perks, and products. People were paying millions for the rights to say they were the true owners of, say, an ape with golden fur or one with heart-shaped sunglasses. “When I first saw Bored Apes, I was like, ‘What the fuck is that?’” said one former employee. “And then seeing how much people were paying for that — it was just insane.”
As more images of apes, punks, cats, and penguins changed hands, OpenSea collected more fees. Revenue skyrocketed from $9 million in the second quarter of 2021 to $167 million in Q3 and $186 million in Q4, according to an internal company document. “It was a really fun period,” said another employee. “The minute you put out a feature, so many people would talk about it.”
Suddenly, Finzer and Atallah’s marketplace was generating meaningful amounts of cash, and investors were frothing at the mouth. In July, the startup landed yet another funding round, drumming up $100 million at a $1.5 billion valuation. “The celebrities coming out of the woodwork, the cash grabs, [they were] just really exciting,” said one former employee. “People I haven’t talked to for years were emailing me… Everybody saw a chance to become filthy rich.”
But with more money came more problems. “Every stressful thing felt like the biggest deal in the world,” Finzer told employees in 2023 about the early days of the company.
In September 2021, OpenSea asked Nate Chastain, the startup’s head of product, to resign after some industry watchers discovered that he was trading NFTs with insider information. Chastain’s scheme was simple. Every few days, OpenSea would promote new collections on its homepage. Given that the marketplace was the de facto locale to buy and sell NFTs, the tokens inevitably jumped in price after they were featured on the site. Chastain knew which would be chosen, so shortly after the NFTs appeared on the homepage, he flipped them for profit. “That kind of attitude Nate embodied at the time was pretty prevalent in the space,” said one former employee.
Chastain was eventually sentenced to three months in prison — the first time the Department of Justice successfully prosecuted someone for NFT insider trading. However, insider trading was only one of OpenSea’s issues. Users were also angry about website outages, NFT collections that were either spam or deliberately fraudulent, and stolen NFTs. “It was like a blood orgy,” a former employee told me about the company’s growing difficulties. Another former staffer said that users joked that OpenSea should instead be called “BrokenSea.”
“OpenSea strives to be responsive and tuned in to users,” Galper said.
To combat the sudden flood in volume and other issues, Finzer and Atallah needed to build out OpenSea’s staff and started bringing in those with Big Tech or corporate pedigrees, according to multiple former employees. “There was no promotion from within,” said one.
“They hired these fucking animals, these reptiles from like Amazon, Facebook, Google,” said another former employee. “The white walkers came in through the fucking door like in Game of Thrones.”
Much of the current leadership team arrived in the latter half of 2021 and the first half of 2022, including COO Shiva Rajaraman and CTO Nadav Hollander. At its height, OpenSea had around 300 staffers — a significant expense that, just a few months later, Finzer and Atallah would reduce.
“Our priority has always been to hire the best talent wherever we find it, whether from Big Tech, smaller companies, or crypto natives,” wrote Galper.
For the moment, though, the money kept coming. OpenSea’s revenue reached an all-time high of $265 million in Q1 of 2022. And the two cofounders closed their largest funding round to date: $300 million from blue-chip venture capital firms that valued OpenSea at a whopping $13.3 billion. Finzer and Atallah each owned 19 percent of OpenSea as of late 2021, according to Forbes. On paper, they were billionaires. (Galper said the cofounders’ reported stakes in OpenSea were false. Forbes, though, hasn’t issued a correction regarding the cofounders’ ownership percentages.)
The company’s investors included not only venture capitalists who specialized in crypto but also a who’s who of Silicon Valley and beyond. There was Shark Tank king Mark Cuban, basketball star Kevin Durant, actor Ashton Kutcher, and DJ 3LAU, all of whom were publicly disclosed as investors. According to an internal company document, OpenSea’s cap table also included James Musk; Jawed Karim, cofounder of YouTube; Scott Belsky, the chief strategy officer of Adobe; and Charlie Songhurst, the former head of strategy at Microsoft.
Quietly, Finzer, Atallah, and a handful of early employees were able to cash out some of their equity in the mammoth fundraise, according to a source familiar with the deal.
Galper confirmed to me that some employees were able to sell their shares “in connection with the Series C financing,” but he didn’t specify the size of Finzer’s and Atallah’s winnings.
“The team and investors felt it was the right thing to do to provide some liquidity to those who’d worked so hard to get the company to that milestone,” Galper added.
Five former employees told me that the cofounders never disclosed the secondary share buybacks to the entire staff. “It surprises me a little because they seemed very transparent about other decisions,” said one person, who added that they were otherwise nonplussed about the news.
And those whose shares vested after the Series C were subsequently blocked from selling their equity, said two former employees. (“The company doesn’t recall any employees requesting to sell to a specified investor after the Series C,” Galper said.)
“The big story will be the secondary sales,” said one former staffer. “The rest is way less funny.”
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OpenSea looked like it was becoming mainstream, but the fires wouldn’t go out. Shortly after Hollander, OpenSea’s current CTO, joined the company, his team found a serious vulnerability in the company’s code that would allow an attacker to receive money for an NFT without sending it to the victim. No exploit happened, “but it was one of the scariest things,” Finzer later told employees in 2023.
In March 2022, just as Finzer celebrated OpenSea’s inclusion on Time magazine’s list of the 100 most influential companies of the year, the NFT boom was sputtering. Total sales volume across the market plummeted from approximately $6 billion in January 2022 to just above $1 billion in June, per CryptoSlam. OpenSea’s quarterly revenue decreased as well, dropping to $171 million in the second quarter.
Even worse, up until the first half of 2022, OpenSea kept most of its cash reserves in Ether, the second largest cryptocurrency by market capitalization, according to former employees who were in the all-hands meeting where Finzer briefed them on the company’s finances. Rather than convert the crypto funds into less volatile assets, Finzer said that OpenSea wanted to put its money where its mouth was and support the crypto industry. The only problem? By June 2022, Ether’s price had dropped almost 80 percent in value from November 2021.
Subtracting the money lost from the price decline and other debts, OpenSea had a net loss of $170.7 million in the second quarter of 2022, even though the startup still raked in $171 million in revenue. (Galper disputed this figure but would not provide financials.) “I was like, ‘What the fuck, you’re not somebody’s personal investor. Why are we gambling on this when we have so much more upside?’” one former employee thought after Finzer announced the financial mishap.
Despite the financial struggles, OpenSea showed up in force that summer at the 2022 incarnation of NFT.NYC. “Did I hear that OpenSea took over a whole hotel in Midtown?” Jodee Rich, cofounder of the conference, asked him at a talkback at Radio City Music Hall. “Sounds about right,” Finzer responded, smiling.
That same week, while much of the OpenSea staff was in the city, Finzer held a companywide meeting to assuage any concerns about the business’s future, according to two former staffers. The takeaway, both former employees said, was clear: don’t worry.
Less than one month later, OpenSea laid off 20 percent of its staff.
Around the same time, Atallah said that he would be stepping back from OpenSea but remain on the board. It was unclear to former employees why Atallah decided to leave. “Devin and Alex, they always had a weird vibe, and I don’t think they were really good together,” said one person. “I’d heard that they didn’t quite see eye to eye on a lot of things,” said another.
One OpenSea investor, who asked to remain anonymous, said that Atallah told him he left on good terms. “I think he’s one of those guys that loves the early days,” said the investor. “As soon as it started to scale and it was getting a little bit more corporate in nature, I think he was like, ‘I want to go do my next thing.’”
Atallah, in a statement, disputed any intimations of conflict between him and Finzer and echoed the investor’s take: “I have always loved early stage stuff, and eventually decided I wanted to explore my own thing again.”
But when Atallah left to do his next thing, Finzer stayed on and led a startup that seemed to be on vastly different footing than it had been just a few months ago. In the third quarter of 2022, revenue free-falled to just $32 million, and OpenSea ran at a deficit of more than $27 million. “Morale just got really weird really quickly,” said one former employee.
In October, yet another thorn in OpenSea’s side presented itself: a new NFT marketplace called Blur. OpenSea used to have a virtual hold on billions of dollars in NFT trading volume. It would soon have to fight for scraps.
Founded by the pseudonymous coder “Pacman,” who would eventually reveal himself to be Tieshun Roquerre, a 20-something MIT dropout and Y Combinator alum, Blur doubled down on a financialized conception of NFTs: assets that traders swap back and forth in search of profit.
Many professional traders wanted to maximize profit, and the royalty fees offered by markets like OpenSea cut into their bottom line. Blur privileged traders over creators and did not give artists a percentage take every time their works sold on its platform. Add in a promised cryptocurrency it said it would distribute to its power users — essentially free money — and NFT flippers flocked to the new marketplace.
Blur quickly ate into OpenSea’s market share. By February 2023, on the strength of the promised launch of its cryptocurrency, it had surpassed OpenSea and almost tripled the monthly tr
