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

Welcome to the metaphysics podcast. The

Metaverse and web three are bringing about the biggest

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

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From the boardroom

to the metaverse. This is the meta business

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

I'm living at my in laws

prior to prior to your living in the metaverse.

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

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

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

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

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

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

is the great promise of the metaverse should it come to

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

destroy the entire moving industry, if done correctly,

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

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

at least to have lots of physical stuff that you would

need to move sort of gets less than significantly should have

capital T capital and Metaverse actually come to fruition.

I look forward to that day.

Moving industry at risk. You heard it here

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

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

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

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

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

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

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

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

insider trading charge involving digital assets. So the story

here basically is this guy Nate Chastain work for open sea

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

authorities supposedly charged with wire fraud, money

laundering, he was trading on confidential information about

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

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

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

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

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

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

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

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

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

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

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

specifically? Yeah, I mean,

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

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

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

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

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

specifically the right people to answer this, but are NFT

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

authority here where they actually can regulate this?

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

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

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

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

communities and other folks who maybe are sleeping a little bit

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

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

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

know, I would say speculation and front running that does

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

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

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

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

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

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

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

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

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

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

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

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

themselves, or they don't actually really have the

authority that they might think they do.

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

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

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

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

where people still like sneakers or like other collective

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

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

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

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

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

any universe where US federal, essentially, law enforcement

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

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

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

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

and make a statement. There's actually

a little bit of precedence here. I remember back

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

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

DraftKings that had all the data around usage of players for

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

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

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

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

FanDuel and DraftKings. They were able to optimize for like

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

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

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

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

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

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

Daily Fantasy industry. The New York Attorney General ended up

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

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

ever like faced real serious legal repercussions or anything

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

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

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

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

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

Yeah, one of the one of the attorneys quoted in

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

industry. Now that federal regulators have NFT transactions

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

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

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

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

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

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

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

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

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

industry? Basically.

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

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

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

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

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

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

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

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

probably what I think, what do you think

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

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

side of call it optimism here where I think this validates

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

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

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

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

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

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

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

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

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

interesting. Obviously one of the biggest players if not the

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

near sky Mavis unveils, first user generated games for xe

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

first projects, the first project stepped accepted in

their builders program. This is an initiative that introduces

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

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

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

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

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

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

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

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

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

put them in the in competition with Roblox and therefore much

less excited about this? Well, so

I if anything, I think it puts them in

competition with Roblox, but that actually makes me more

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

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

Mavis team will be able to execute to create something that

can actually compete with Roblox, like part of me thinks

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

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

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

new potential revenue stream in terms of user generated content.

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

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

was there, they were bringing the Unreal Editor into fortnight

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

companies that were product companies were game companies

are now trying to become user generated platform companies,

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

user user generated content as one of the important pillars of

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

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

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

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

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

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

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

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

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

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

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

will actually utilize this in the way that maybe the Roblox

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

hesitant. But what are your thoughts?

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

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

believe developers can only develop for so many platforms,

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

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

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

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

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

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

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

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

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

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

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

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

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

you get smaller budgets even right you get individuals who,

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

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

not impossible, I see the probability of success very low

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

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

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

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

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

this is the crux of their platform, but mostly because

monetize through like cosmetics and that kind of content right

like that where you have a volume of games and experiences

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

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

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

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

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

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

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

Yeah, I guess you brought up

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

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

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

almost like pseudo appstore Metaverse increases their

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

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

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

interesting story. The headline here South Korea to invest 177

million directly in Metaverse platforms. So the government of

South Korea announced it will start investing in mentorship

first projects directly 170 $7 million will be invested to

kickstart national jobs and companies in the field. This is

from statements made by the Minister of Science and

Information and communication technologies. As we all know,

the South Korea huge gaming market, right huge gaming

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

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

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

following, to push citizens to transition to a fully digital

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

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

into the business of building? Metaverse is or supporting

Metaverse, companies? The amount is

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

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

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

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

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

always been pretty forward in terms of investing in

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

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

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

they invested a ton in in telecommunications back in the

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

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

think, you know, they probably view this program somewhat

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

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

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

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

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

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

service and infrastructure service, if you will. So maybe

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

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

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

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

attract billions of dollars of future investment and, and will

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

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

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

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

the kind of initiative that gets people excited, most

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

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

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

building these meta versus building the platform, building

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

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

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

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

actually had competition between countries with funds like this,

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

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

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

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

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

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

realizing that their citizens will live alternate digital

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

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

I applaud South Korea for doing it and prove that Metaverse

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

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

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

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

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