Ex-OpenSea Manager Nate Chastain Guilty of NFT Fraud, Money Laundering

NFT insider trading isn’t worth apeing into

May 3, 2023 05:05 pm

Diego Thomazini/Shutterstock modified by Blockworks

Nathaniel Chastain, a former manager at OpenSea, was convicted by a jury of wire fraud and money laundering on Wednesday, May 3, marking the culmination of a landmark case with broad implications for the NFT industry. The case has been described as the first ‘insider trading’ prosecution brought within the NFT world.

Chastain pleaded not guilty, and the industry has been paying especially close attention to a potentially precedent-setting outcome since the jury began deliberating earlier this week.

In June 2022, Chastain was charged with wire fraud and money laundering by the Department of Justice.

Chastain allegedly made over $50,000 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 FBI’s Michael Driscoll in a statement last year.

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Reuters reported that prosecutor Thomas Burnett, in closing arguments, said that Chastain “abused” his status at OpenSea, and violated its confidentiality agreement.

Chastain’s lawyer, Daniel Filor, argued that he did not break any company rules with the trades.

OpenSea asked Chastain to resign in September 2021, when the NFT powerhouse additionally said it was putting in place new practices to prevent similar future internal lapses.

An OpenSea spokesperson previously told Blockworks that Chastain’s resignation was because he was found to be “in violation of our employee policies and in direct conflict with our core values and principles.”

Prior to the start of the trial, OpenSea CEO told prosecutors that the case against Chastain was “unfair” and that it impacted his mental health, according to court documents.

Chastain had filed five motions to drop evidence in regard to his OpenSea compensation and exclude terms such as insider trading–arguing that NFTs are not securities.

However, Judge Jesse Furman denied the motions and said that Chastain’s insider trading arguments were “moot” in April.

Updated May 3, 2023 at 7:36 pm ET: Added additional context throughout.

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