Ex-OpenSea Manager Convicted in NFT Insider Trading Scandal

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Key takeaways:

  • According to the prosecution, Nathaniel Chastain benefited from inside knowledge regarding the NFTs that would be offered for sale.
  • It’s the first time someone has received a fine for utilizing insider information to trade non-fungible tokens.

Reuters reports that on May 3, in a New York federal court, the former manager of OpenSea, who had been charged with insider trading of NFTs, was found guilty of wire fraud and money laundering. 

Prosecutors allege that Nathaniel Chastain, a former product manager at OpenSea, was responsible for selecting which NFTs would be offered on the website’s nonfungible token marketplace.

Prosecutors claimed that after making these choices, he routinely bought these NFTs and afterward sold them again after they had been highlighted. On June 1, he was accused of engaging in these purported transactions while committing wire fraud and money laundering. 

Lawyers who focus on crypto-related problems have been closely following the trial since it started on April 24. Legal experts have stated that whether or not NFTs are regarded as securities may depend on how the case turns out.

After allegations of insider trading gained traction on social media in September 2021, Chastain was forced to resign from his position. Chastain was charged with utilizing his position for personal gain by choosing which NFTs would appear on OpenSea’s site, among other things.

Prosecutors claim that between June 2021 and September 2021, Chastain gained more than $50,000 by purchasing NFTs on sale that he knew would be highlighted on the business’ website, then reselling them at a profit when the NFTs’ prices jumped as a result of the increased attention. Chastain used OpenSea accounts and anonymous wallets to try to hide his purchases. In a statement, U.S. Attorney Damian Williams said:

“Nathanial Chastain exploited his advanced knowledge of which NFTs would be featured on OpenSea’s website to make profitable trades for himself,” 

Daniel Filor, the defense attorney, asserted in the trial’s closing arguments that Chastain wasn’t guilty since he had never been informed that the material was meant to be confidential, as stated in the May 3 report:

“Nobody told Nate that he couldn’t use or share that information.”

It’s the first time someone has received a fine for utilizing insider information to trade non-fungible tokens.

Allison Nichols, the prosecutor, asserted that Chastain was aware that he was breaching the law. She said he made the trades using anonymous OpenSea accounts because he was worried about getting caught.

In a different case in July, Ishan Wahi, a former employee of Coinbase, and his brother Nikhil were also accused of insider trading in cryptocurrencies. On September 12, Nikhil Wahi entered a guilty plea.

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