Former OpenSea Exec Charged With NFT Insider Trading
Nate Chastain allegedly used confidential information to pocket 19 ETH and now faces up to 40 years in prison
Source: Shutterstock
key takeaways
- The case is considered to be first indictment in a digital asset insider trading scheme
- Chastain resigned as OpenSea’s product manager in September
The Department of Justice has indicted former OpenSea head of product Nathanial Chastain with insider trading in connection to NFTs in Manhattan federal court on Wednesday. Chastain was charged with one count of wire fraud and one count of money laundering.
According to the indictment, Chastain was accused of buying dozens of NFT (non-fungible tokens) with the prior knowledge that the assets would be featured on the NFT marketplace.
He then sold them at a profit two to five times the original purchase price using anonymous digital currency wallets and anonymous accounts on OpenSea.
Reuters reported that Chastain acquired up to 45 NFTs between June and September 2021.
US Attorney Damian Williams stated that “NFTs might be new, but this type of criminal scheme is not,” adding that Chastain’s “betrayal” and other insider trading crimes would be stamped out — “whether it occurs on the stock market or the blockchain.”
Chastain resigned from his position after being suspected of profiting from insider information in September 2021. His suspicious wallet activity on Etherscan was initially flagged by perceptive Twitter users.
A spokesperson for OpenSea told Blockworks that Chastain was asked to leave because his behavior was “in violation of our employee policies and in direct conflict with our core values and principles.”
OpenSea admitted that an employee used inside knowledge to outsmart the market, and the company’s CEO Devin Finzer publicly accepted Chastain’s resignation in a blog post. At the time, Finzer claimed that OpenSea put new rules in place to protect against this.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force, with investigation aid from the National Cryptocurrency Enforcement Team.
Each of the charges carry a potential maximum sentence of 20 years in prison.
Update on June 6, 2022 at 1:49 pm ET: Chastian was asked to leave OpenSea before his resignation.
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