Episode 28

full
Published on:

6th Jun 2022

28. OpenSea Insider Trading, Axie Infinity User-Generated Games, South Korea Metaverse

In this episode, we discuss the United States Department of Justice charging a former OpenSea executive with NFT insider trading, Sky Mavis unveiling the first user-generated Axie Infinity games, South Korea investing $177 million into metaverse platforms, and so much more!

Episode 28 Keywords: OpenSea, NFT, insider trading, Sky Mavis, Axie Infinity, South Korea, investing, metaverse platforms

Transcript
Unknown:

Welcome to the metaphysics podcast. The

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Metaverse and web three are bringing about the biggest

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revolution since the internet itself. With your hosts Paul the

Unknown:

prophet Dawalibi And Jeff the juice Cohen. We will be bringing

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you the latest Metaverse, business news and insight into

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what it all means. The meta business podcast starts now.

Unknown:

From the boardroom

Paul Dawalibi:

to the metaverse. This is the meta business

Paul Dawalibi:

podcast. I am Paul the Prophet Dawalibi. I'm joined today by my

Paul Dawalibi:

friend and co host, Jeff the juice Cohen. For those of you

Paul Dawalibi:

who are new here, welcome to the official podcast the metaverse

Paul Dawalibi:

what we do is we cover the most pressing, Metaverse, topics news

Paul Dawalibi:

of the week, we look at all of it through a business and C

Paul Dawalibi:

suite lens, we dissect, we analyze the business

Paul Dawalibi:

implications of everything happening in this industry. For

Paul Dawalibi:

our regular listeners. Thank you guys for tuning in every week.

Paul Dawalibi:

Thank you for the love the five star ratings and reviews if you

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haven't yet, do two things. Leave a five star rating and

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review and go share the podcast with someone else send it to

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someone email it to someone texted to someone share an

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episode you really love. This is how we've grown really

Jeff Cohen:

appreciate you. I'm actually homeless at the moment.

Jeff Cohen:

I'm living at my in laws

Unknown:

prior to prior to your living in the metaverse.

Jeff Cohen:

We're living in the metaverse. So this is a virtual

Jeff Cohen:

Metaverse background. But you know otherwise good. I feel like

Jeff Cohen:

I'm you know, I'm tired. I'm not gonna lie. I'm I'm a little

Jeff Cohen:

tired. So I need I need you to pick me up with some energy.

Paul Dawalibi:

Well, this is one of those. So moving is probably

Paul Dawalibi:

my most hated thing in life as well. But I will say that this

Paul Dawalibi:

is the great promise of the metaverse should it come to

Paul Dawalibi:

fruition? It may completely nullify, you know, it may

Paul Dawalibi:

destroy the entire moving industry, if done correctly,

Paul Dawalibi:

right. If we can really just plug in and live this alternate

Paul Dawalibi:

life in the metaverse the need to move physical locations, or

Paul Dawalibi:

at least to have lots of physical stuff that you would

Paul Dawalibi:

need to move sort of gets less than significantly should have

Paul Dawalibi:

capital T capital and Metaverse actually come to fruition.

Jeff Cohen:

I look forward to that day.

Paul Dawalibi:

Moving industry at risk. You heard it here

Paul Dawalibi:

first. Members. All right, we got a lot of a lot of news to go

Paul Dawalibi:

through here. Or we have some some good stories this week. I

Paul Dawalibi:

found that I want to make sure we touch on and let's start with

Paul Dawalibi:

I thought this was interesting just because it's the first I'd

Paul Dawalibi:

heard of it. You'd like the story. I had not seen anything

Paul Dawalibi:

like this before. And the headline here is us charges. X

Paul Dawalibi:

opens the exec with NFT insider trading. So the department of

Paul Dawalibi:

justice officials say it's the first time they've pursued an

Paul Dawalibi:

insider trading charge involving digital assets. So the story

Paul Dawalibi:

here basically is this guy Nate Chastain work for open sea

Paul Dawalibi:

equipped after, you know, he got in the crosshairs of US

Paul Dawalibi:

authorities supposedly charged with wire fraud, money

Paul Dawalibi:

laundering, he was trading on confidential information about

Paul Dawalibi:

which NF T's were about to be featured on the open sea

Paul Dawalibi:

homepage. Obviously, if an NF T's featured on the homepage,

Paul Dawalibi:

right, going to most likely go up in value, people will bid it

Paul Dawalibi:

up or will, you know, will will pay higher and higher price

Paul Dawalibi:

because it's more visible to more people. And I guess he was

Paul Dawalibi:

buying these. But he flipped dozens of NF T's after choosing

Paul Dawalibi:

to feature them on the website, selling them for two to five

Paul Dawalibi:

times what he initially paid. What do you think of NF T

Paul Dawalibi:

insider trading here, Jeff, kind of you know, I wouldn't say fun

Paul Dawalibi:

story. But, you know, one that we don't talk about very often

Paul Dawalibi:

here. What do you make of NFT insider trading? And this story

Paul Dawalibi:

specifically? Yeah, I mean,

Jeff Cohen:

it's it's an interesting one, I don't know.

Jeff Cohen:

You know, I'm not exactly sure. You know, what to know what to

Jeff Cohen:

make of it? Does? It, does it? I mean, it makes sense, you know,

Jeff Cohen:

these digital assets have value. So, you know, technically, the

Jeff Cohen:

question, in my mind is, you know, and I don't know if we're

Jeff Cohen:

specifically the right people to answer this, but are NFT

Jeff Cohen:

securities, like, does the SEC actually have, you know,

Jeff Cohen:

authority here where they actually can regulate this?

Jeff Cohen:

Because, you know, it's not like stocks or bonds, where they're

Jeff Cohen:

regulated by the SEC. These things aren't, you know,

Jeff Cohen:

registered as securities. So it's an interesting gray area of

Jeff Cohen:

the law. I bet there's a lot of people you know, in discord

Jeff Cohen:

communities and other folks who maybe are sleeping a little bit

Jeff Cohen:

weary or, you know, with one eye open tonight thinking like, hey,

Jeff Cohen:

you know, did I do something wrong if I've been kind of doing

Jeff Cohen:

something similar to this because there is a lot of, you

Jeff Cohen:

know, I would say speculation and front running that does

Jeff Cohen:

happen in these discord communities, like, it's pretty

Jeff Cohen:

similar to what we see actually in stock trading where you have

Jeff Cohen:

these Reddit groups that you know, go on and say, Hey, I just

Jeff Cohen:

bought this stock, everyone else should go buy it. And it's a

Jeff Cohen:

little bit of like a pump and dump this year is is an

Jeff Cohen:

interesting one, it's definitely not a great look for for open

Jeff Cohen:

see as a platform, you know, particularly when they're

Jeff Cohen:

looking to be kind of the leader in trading these NF T's and kind

Jeff Cohen:

of trading digital assets, you know, in game, so it's a bit of

Jeff Cohen:

a black guy for them. It'll be interesting to see, you know,

Jeff Cohen:

where the law actually shakes out here. This could be just,

Jeff Cohen:

you know, what US Attorney looking to make a name for

Jeff Cohen:

themselves, or they don't actually really have the

Jeff Cohen:

authority that they might think they do.

Paul Dawalibi:

You Yeah, it's an interesting one. Well, they did

Paul Dawalibi:

fire the guy. So there's that. I think you bring up such a good

Paul Dawalibi:

point about it being a security or not, though, because that got

Paul Dawalibi:

me thinking like, you know, stock X, right, these websites

Paul Dawalibi:

where people still like sneakers or like other collective

Paul Dawalibi:

physical collectibles, right, like sneakers, or, you know, the

Paul Dawalibi:

latest hoodie from Balmain or whatever, right? If I work at

Paul Dawalibi:

socket, and I know, this sneaker is going to be featured on the

Paul Dawalibi:

homepage, and I buy the sneaker in advance, only to then flip it

Paul Dawalibi:

when it's featured on the homepage. Do you think there's

Paul Dawalibi:

any universe where US federal, essentially, law enforcement

Paul Dawalibi:

here would get involved? Because I'm flipping sneakers as an

Paul Dawalibi:

insider on stock X? Do you think that it has put it in the

Paul Dawalibi:

crosshairs a little bit, right. But that there's this perception

Paul Dawalibi:

that people might be abusing this and they need to come in

Paul Dawalibi:

and make a statement. There's actually

Jeff Cohen:

a little bit of precedence here. I remember back

Jeff Cohen:

I feel like it was 2015 or 16, when DraftKings actually had a

Jeff Cohen:

bit of a scandal, where they had employees that were working at

Jeff Cohen:

DraftKings that had all the data around usage of players for

Jeff Cohen:

their daily fantasy site. And they weren't betting on the

Jeff Cohen:

DraftKings. They weren't using it on the DraftKings site. But

Jeff Cohen:

what they would do is they would go on the FanDuel site. And

Jeff Cohen:

because, you know, the usage of players was very similar on

Jeff Cohen:

FanDuel and DraftKings. They were able to optimize for like

Jeff Cohen:

the best roster because they knew who was you know, what

Jeff Cohen:

players the public was using. And like one guy, I remember one

Jeff Cohen:

something like 300 grand, like a massive prize pool on FanDuel.

Jeff Cohen:

And then didn't think he did anything wrong, like posted

Jeff Cohen:

about it in a chat group. And it became like a massive thing. And

Jeff Cohen:

if you recall, that's literally what basically brought down the

Jeff Cohen:

Daily Fantasy industry. The New York Attorney General ended up

Jeff Cohen:

suing and saying it was like insider trading. I don't think

Jeff Cohen:

that employee ever, you know, he did get fired. I don't think he

Jeff Cohen:

ever like faced real serious legal repercussions or anything

Jeff Cohen:

like that. But it actually became a massive scandal. For

Jeff Cohen:

something you wouldn't think it's like, well, it's daily

Jeff Cohen:

fantasy, it's not gambling. And it's, it's really just a product

Jeff Cohen:

for fun. So like there shouldn't be, quote, unquote, insider

Jeff Cohen:

trading. So it's actually pretty, pretty analogous.

Paul Dawalibi:

Yeah, one of the one of the attorneys quoted in

Paul Dawalibi:

this article says, This sends a very, very loud message to the

Paul Dawalibi:

industry. Now that federal regulators have NFT transactions

Paul Dawalibi:

in their crosshairs, he says, We know that there's a lot of

Paul Dawalibi:

insider trading in the industry, and NF T's and decentralized

Paul Dawalibi:

finance. So the question is, are you really disclosing all the

Paul Dawalibi:

information users or the community? I mean, it'll be

Paul Dawalibi:

interesting to see if this is unraveling, something much, much

Paul Dawalibi:

bigger, right? Where now they come down hard on everything.

Paul Dawalibi:

And, and and we start to see, you know, two of these stories a

Paul Dawalibi:

week? Or is this more just like a shot across the bow? We make

Paul Dawalibi:

exam example of this one guy, and, you know, like, Shape Up

Paul Dawalibi:

industry? Basically.

Jeff Cohen:

It's a really good question. What do you think? I

Jeff Cohen:

mean, my man, I went back and forth, as you were you were

Jeff Cohen:

talking? I think it probably will be a bit of a shot across

Jeff Cohen:

the bow slash, you know, you have to set some legal

Jeff Cohen:

precedent, if this is the first time like it will, this case

Jeff Cohen:

will probably have to go through the courts and see, you know,

Jeff Cohen:

whether whether it actually gets upheld. And then maybe if it

Jeff Cohen:

does, they the prosecutors start going after others. That's

Jeff Cohen:

probably what I think, what do you think

Paul Dawalibi:

I'm with you on that? And I, you know, I think

Paul Dawalibi:

that it's the first warning shot. Now I like to take the

Paul Dawalibi:

side of call it optimism here where I think this validates

Paul Dawalibi:

NFPs in some way, right. If if there wasn't anything there, if

Paul Dawalibi:

this was all vaporware, if this was right, that maybe like in

Paul Dawalibi:

some ways, and the fact that they're going after this means

Paul Dawalibi:

this is more real. Now, I don't know if that's a fair statement,

Paul Dawalibi:

but you know, it feels it makes it more real for me at least

Paul Dawalibi:

right that they're treating this in the same way they treat if

Paul Dawalibi:

someone was insider trading a stock validates this as a as an

Paul Dawalibi:

asset of some sort. Yeah. Let's talk about sky Mavis, Jeff guy

Paul Dawalibi:

made myths in the news. And that's always I think,

Paul Dawalibi:

interesting. Obviously one of the biggest players if not the

Paul Dawalibi:

biggest in the play to play to earn space. And the headline

Paul Dawalibi:

near sky Mavis unveils, first user generated games for xe

Paul Dawalibi:

infinity x infinity owned by sky mammoth. So they unveiled their

Paul Dawalibi:

first projects, the first project stepped accepted in

Paul Dawalibi:

their builders program. This is an initiative that introduces

Paul Dawalibi:

UGC or user generated content in the XE infinity ecosystem. So

Paul Dawalibi:

it's a laboratory for community created games. And obviously NF

Paul Dawalibi:

T is at the heart of all of this right like it's still part of

Paul Dawalibi:

the axemen ecosystem so it's all the same mechanics underlying it

Paul Dawalibi:

and blockchain etc. But this is new for them because up until

Paul Dawalibi:

now, guy maybe this was building their own games was building

Paul Dawalibi:

their own experiences. Is this a monumental announcement? Jeff,

Paul Dawalibi:

like are we going to be talking about this six months from now

Paul Dawalibi:

or a year from now still, or or is this like, I mean, does this

Paul Dawalibi:

put them in the in competition with Roblox and therefore much

Paul Dawalibi:

less excited about this? Well, so

Jeff Cohen:

I if anything, I think it puts them in

Jeff Cohen:

competition with Roblox, but that actually makes me more

Jeff Cohen:

excited. The reason why I hesitate to say it's going to be

Jeff Cohen:

a monumental shift just because I don't know whether the sky

Jeff Cohen:

Mavis team will be able to execute to create something that

Jeff Cohen:

can actually compete with Roblox, like part of me thinks

Jeff Cohen:

just the you know, the community is really there for playing or

Jeff Cohen:

like, I don't know if you're gonna see the type of engagement

Jeff Cohen:

that we see with with Robox. But it definitely opens up a massive

Jeff Cohen:

new potential revenue stream in terms of user generated content.

Jeff Cohen:

I think we saw a very similar thing with fortnight where they

Jeff Cohen:

are now kind of opening up the fortnight creative and the story

Jeff Cohen:

was there, they were bringing the Unreal Editor into fortnight

Jeff Cohen:

to kind of beef up the creative mode. So it seems like all these

Jeff Cohen:

companies that were product companies were game companies

Jeff Cohen:

are now trying to become user generated platform companies,

Jeff Cohen:

which I think makes all the sense in the world. If you view

Jeff Cohen:

user user generated content as one of the important pillars of

Jeff Cohen:

the metaverse, which I actually think I do believe that that's

Jeff Cohen:

the case. So I think it's a very big potential step. The reason

Jeff Cohen:

why I'm not ready to call this and say, Oh, my God, this is a

Jeff Cohen:

monumental piece of news is just because I'm a little skeptical

Jeff Cohen:

of I'll actually be able to execute on it. And that the play

Jeff Cohen:

to earn type community, which let's be honest, I think, some

Jeff Cohen:

stat there were some stats that over 40%, of users of x infinity

Jeff Cohen:

at its peak, were the scholars in the Philippines, those people

Jeff Cohen:

were there because it was a digital job, not because they

Jeff Cohen:

were coming to engage and create content and be part of that

Jeff Cohen:

ecosystem. So I'm a little skeptical that the XE community

Jeff Cohen:

will actually utilize this in the way that maybe the Roblox

Jeff Cohen:

community has as clearly. That's the only reason why I'm

Jeff Cohen:

hesitant. But what are your thoughts?

Paul Dawalibi:

Yeah, you know, I personally don't think this is

Paul Dawalibi:

going to be assessed, I think, going up against like, that. I

Paul Dawalibi:

believe developers can only develop for so many platforms,

Paul Dawalibi:

right. So to me, this is there is some element of making the

Paul Dawalibi:

pie bigger. But I also think in some ways, it's a zero sum game,

Paul Dawalibi:

you're spending all of your time building games for Roblox,

Paul Dawalibi:

you're probably not going to spend time building games for x

Paul Dawalibi:

the Infinity platform also, and, and I think Roblox probably too

Paul Dawalibi:

far along, like, I don't think there's going to be developers

Paul Dawalibi:

jumping ship. So what is the universe of developers who love

Paul Dawalibi:

this platform, who also have the talent to develop content, and

Paul Dawalibi:

can make something really good that people will play? Like, I

Paul Dawalibi:

think you're starting to get into really, really small

Paul Dawalibi:

numbers. And my fear is, with anything played earn, the

Paul Dawalibi:

fundamental problem has been making good games. And, and, and

Paul Dawalibi:

opening it up to UGC in my mind doesn't solve that right that

Paul Dawalibi:

you get smaller budgets even right you get individuals who,

Paul Dawalibi:

you know, if unless your studio with hundreds of millions of

Paul Dawalibi:

dollars making a great game is really hard. And so while it's

Paul Dawalibi:

not impossible, I see the probability of success very low

Paul Dawalibi:

doesn't solve the making great games problem, probably. And the

Paul Dawalibi:

the ability to track track developers is low, probably. I

Paul Dawalibi:

just don't see where the seams are where it fits. I'm not sure

Paul Dawalibi:

UGC is the answer. The plate earns problems in the same way

Paul Dawalibi:

it's very much as the answer to like like for Roblox, right,

Paul Dawalibi:

this is the crux of their platform, but mostly because

Paul Dawalibi:

monetize through like cosmetics and that kind of content right

Paul Dawalibi:

like that where you have a volume of games and experiences

Paul Dawalibi:

available. Makes more sense to me. I think you made a great

Paul Dawalibi:

point. The majority of people going into x infinity, are there

Paul Dawalibi:

because they want to earn an extra dollar that day. What do

Paul Dawalibi:

they care if there's a cute little mod on a something that

Paul Dawalibi:

they've already played or like? It's either helps them make $1

Paul Dawalibi:

faster or slower or the same speed and it'll sort of survive

Paul Dawalibi:

or fail on that as well, that sort of points alone in my mind.

Paul Dawalibi:

Yeah, I guess you brought up

Jeff Cohen:

a good point. So that's the only KPI that really

Jeff Cohen:

the players care about is how much money they can earn. So

Jeff Cohen:

unless this user generated content, sort of, you know,

Jeff Cohen:

almost like pseudo appstore Metaverse increases their

Jeff Cohen:

ability to earn, it's not going to draw on new players.

Paul Dawalibi:

Let's let's talk about investment in meta vs. For

Paul Dawalibi:

a moment to check this story. Again, when you flag that really

Paul Dawalibi:

interesting story. The headline here South Korea to invest 177

Paul Dawalibi:

million directly in Metaverse platforms. So the government of

Paul Dawalibi:

South Korea announced it will start investing in mentorship

Paul Dawalibi:

first projects directly 170 $7 million will be invested to

Paul Dawalibi:

kickstart national jobs and companies in the field. This is

Paul Dawalibi:

from statements made by the Minister of Science and

Paul Dawalibi:

Information and communication technologies. As we all know,

Paul Dawalibi:

the South Korea huge gaming market, right huge gaming

Paul Dawalibi:

population, maybe the biggest esports market in the world. And

Paul Dawalibi:

this is a new focus for them. It's included in what they call

Paul Dawalibi:

their digital New Deal, a set of guidelines the government's

Paul Dawalibi:

following, to push citizens to transition to a fully digital

Paul Dawalibi:

society. Two questions for you here. What do you think of the

Paul Dawalibi:

amount 177 million? And what do you think of government? Getting

Paul Dawalibi:

into the business of building? Metaverse is or supporting

Paul Dawalibi:

Metaverse, companies? The amount is

Jeff Cohen:

is seems low. I mean, for country like I think,

Jeff Cohen:

you know, we've seen announcements of VC funds that

Jeff Cohen:

are five to 10x. This so I do think, you know, the amount is a

Jeff Cohen:

little bit paltry in my opinion. Having said that, you know,

Jeff Cohen:

South Korea, I believe, you know, their government has

Jeff Cohen:

always been pretty forward in terms of investing in

Jeff Cohen:

technology. I believe they've they've done a lot in terms of

Jeff Cohen:

infrastructure, like one of the reasons why South Korea is so

Jeff Cohen:

like esports are so popular in South Korea, I think because

Jeff Cohen:

they invested a ton in in telecommunications back in the

Jeff Cohen:

90s. And like, they have really good high speed internet and

Jeff Cohen:

like free Wi Fi, because of all that government investment. So I

Jeff Cohen:

think, you know, they probably view this program somewhat

Jeff Cohen:

similarly. So I think it's it's definitely a smart move. You

Jeff Cohen:

know, if we view the metaverse, potentially, at some point as

Jeff Cohen:

the future of the Internet, well, the internet really isn't

Jeff Cohen:

owned by any company, at this point anymore, maybe back in the

Jeff Cohen:

day you needed like AOL, and you'd have to pay them a monthly

Jeff Cohen:

subscription. But now it's largely, you know, a, I guess, a

Jeff Cohen:

service and infrastructure service, if you will. So maybe

Jeff Cohen:

it doesn't make sense for the government to own it.

Paul Dawalibi:

Yeah, I mean, I don't know about ownership here.

Paul Dawalibi:

First of all, I'm not fussed by the number. I think it's one of

Paul Dawalibi:

those. It's an amount that Prime's pomp, and I think will

Paul Dawalibi:

attract billions of dollars of future investment and, and will

Paul Dawalibi:

create, you know, a lot of future value. So I love the fact

Paul Dawalibi:

that they're thinking ahead here. I think all major

Paul Dawalibi:

governments should be thinking about this, whether it's the US

Paul Dawalibi:

or Canada or UK or countries in the Middle East, like this is

Paul Dawalibi:

the kind of initiative that gets people excited, most

Paul Dawalibi:

importantly, attracts talent. I don't think we've talked about

Paul Dawalibi:

that. But when you have, you know, Facebook flash meta

Paul Dawalibi:

investing 10 billion a year, there is competition for talent,

Paul Dawalibi:

building these meta versus building the platform, building

Paul Dawalibi:

the technologies. And so wanting to keep people in South Korea

Paul Dawalibi:

and the brains in South Korea makes a lot of sense from a

Paul Dawalibi:

government perspective. So I mean, hard to not love this on

Paul Dawalibi:

all fronts. I just wish it was way more widespread. And you

Paul Dawalibi:

actually had competition between countries with funds like this,

Paul Dawalibi:

you know, wanting to attract the best and the brightest to build

Paul Dawalibi:

there. This to me is the only way. The Metaverse capital M

Paul Dawalibi:

comes to fruition. And I don't say this alone, because I do

Paul Dawalibi:

think meta spending 10 billion a year is one of those critical

Paul Dawalibi:

steps that needs to be taken and one of those critical pieces of

Paul Dawalibi:

the puzzle. But I think government's getting behind this

Paul Dawalibi:

realizing that their citizens will live alternate digital

Paul Dawalibi:

lives and they should have some hand in helping to build and

Paul Dawalibi:

create that, I think is is fascinating and great to see and

Paul Dawalibi:

I applaud South Korea for doing it and prove that Metaverse

Paul Dawalibi:

evolves out of gaming more first and foremost, this is why this

Paul Dawalibi:

is coming out of South Korea in my mind. agreed on that. Yeah,

Paul Dawalibi:

super good episode wraps On this week's episode, I know it's a

Paul Dawalibi:

bit of a short one. But hopefully everyone enjoyed it.

Paul Dawalibi:

Guys, don't forget to subscribe to the podcast leave a like,

Paul Dawalibi:

review five star review, share the podcast with a friend with a

Paul Dawalibi:

family member with a colleague. Really appreciate it. Don't

Paul Dawalibi:

forget, the future is fun. We'll see you guys next week.

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META Business
From the metaverse to the boardroom...
Meta Business tackles the most important Metaverse industry news. Business experts dissect and discuss all of the hottest topics and happenings, from a unique C-suite perspective.

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