The recent acquisition of Meebit, the NFT platform by Yuga is no doubt a good deal for both companies, according to the comments made by their management. However, a recent revelation that 14 Ethereum wallets that may be associated with the owners of the businesses actually bought a large number of Meebit NFTs before the deal was sealed has put the reputation of the companies in question.
According to reports by The Fashion Law and Ethereum World News, 14 Ethereum addresses that have never acquired NFTs in the past, suddenly became lovers of NFT collectibles, just days before the acquisition of Meebit. Available information shows that the 14 wallets bought 159 Meebit NFTs in 6 days (March 5 – March 11). This has raised the possibility that this was insider trading by people who were privy to the impending change of ownership at Meebit. That the Ethereum wallet addresses have no history of collecting NFTs could be a pointer of insider trading.
Unregulated Assets Vulnerabilities
While speaking in an interview with Bloomberg, Darren Heitner, an intellectual property attorney in New York said that NFTs have vulnerabilities in terms of their listings. He said that this is especially so considering that it is in a space that is not regulated in the real sense of the word.
This is not the first time that people who are close to deals are taking advantage of the prospective rise in the value of tokens to cash out big for themselves. Opensea reported last year that a staff member took advantage of privileged information to buy a non-fungible token that was about to be listed on its home page.
Are NFTs Securities That Should Come Under SEC’s Purview?
With the recent allegation of insider trading, questions are being asked if NFTs are securities which should come under SEC purview. This considers the fact that since people with insider information could take advantage of such to exploit the market, that there is a need to regulate it.
Jones Day, a law firm stated its position regarding how NFTs should be classified after stating that there are many issues to be considered since such classification will be guided by several factors:
“If an NFT is considered a security, then common securities law issues would be present (e.g., registration or exemption of the offering under the Securities Act of 1933)”
They also stated that sellers and brokers should be registered under the Securities Exchange Act of 1934. Then the market places should not be left out as stated in the Exchange Act.
Other considerations are laws guiding:
“liability for material omissions or misstatements and insider trading; restrictions on short sales and market stabilization around an initial offering; and so on.”