OpenSea Ex-Employee charged in first ever NFT Insider Trading Case

Key Takeaways

  • Nathanial Chastain is accused of exploiting his advanced knowledge of what NFTs would be featured on OpenSea’s homepage for his personal financial gain.
  • In 2021, he anonymously purchased around 45 NFTs, then sold them two and five times his purchasing price after they rose in value.
  • OpenSea had earlier fired Nate Chastain in 2021 after acknowledging his involvement in insider trading.

On Wednesday, the U.S. Department of Justice booked former OpenSea employee Nathaniel Chastain in the first case of digital asset insider trading.

Nathanial Chastain, 31, a former product engineer for OpenSea, was arrested Wednesday morning and was accused of using confidential information to purchase NFTs before they would be featured on the homepage and shoot up in value. Nathanial is charged with wire fraud and money laundering, each carrying a maximum 20-year prison term.

U.S. Attorney Damian Williams, in his official statement, said,” As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself.” He further adds, “Today’s charges demonstrate the commitment of this office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”

Michael J. Driscoll, the FBI Assistant Director-in-Charge states that the accused launched “an age-old scheme to commit insider trading by using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage.”

According to the indictment, between June and September 2021, he anonymously purchased nearly 45 NFTs on 11 separate occasions, then sold them for two and five times his purchasing price after they rose in value. The Federal Prosecutors accuse Chastain of exploiting his extensive knowledge of what NFTs would be featured on OpenSea’s homepage for his selfish personal financial gain.

The first digital asset insider trading case is being handled by the Office’s Securities and Commodities Fraud Task Force. Eventhough this is the first official case of NFT Insider trading, there has been instances in which people were accused of being involved in NFT Insider trading. For example, Alexandre Arnault, the son of the second-richest person in the world, Bernard Arnault, was involved in suspicious trading of NFTs earlier this year

OpenSea-the largest NFT Marketplace had, acknowledged in September it has uncovered evidence against its product head Nate Chastain in an insider trading scam for using confidential information to flip NFTs that were featured on the homepage. OpenSea co-founder Devin Finzer wrote at the time that the company was committed to doing the right thing for its users and earning back the trust of the community it serves.

OpenSea was most recently valued at USD 13.3 billion by investors including Andreessen Horowitz, Paradigm, and Coatue. The arrest is expected to trigger a new wave of enforcement actions related to NFTs.

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Saniya Raahath

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