A former employee of the leading NFT marketplace has officially been charged with insider trading in a landmark NFT case by the U.S. Department of Justice.
What Happened: The U.S. Department of Justice filed charges against Nathaniel Chastain Wednesday. Chastain is a former product manager at OpenSea, a leading non-fungible token marketplace.
The allegations state Chastain traded Ethereum (CRYPTO: ETH)-based NFTs on inside information of what NFTs would be featured on the homepage of OpenSea. Chastain was tasked with selecting which NFTs would be featured on the homepage, giving him direct knowledge of which projects would later appear on the site.
The floor price of projects on the homepage typically rose, increasing the value of purchases linked to Chastain.
Official charges against Chastain include wire fraud and money laundering in connection to insider trading.
“NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself,” U.S. Attorney Damien Williams said.
Charges state that Chastain was insider trading from June 2021 to September 2021 and often sold the NFTs he purchased for two to five times the initial price he paid. Anonymous wallets were used for the purchases and sales according to the charges.
Chastain was arrested in New York on Wednesday. The two counts of wire fraud and money laundering each carry a maximum sentence of 20 years in prison.
Chastain resigned from OpenSea in September 2021 after allegations on social media of the trades began surfacing. The company said it requested and accepted his resignation.
Related Link: How To Buy NFTs
Why It’s Important: This marks the first-ever digital asset insider trading case and could have lasting impact for the NFT community and influencers and leaders in the space.
“Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain,” Williams said.
FBI Assistant Director-in-Charge Michael J. Driscoll said the FBI will continue to seek out and charge those who manipulate the NFT market in a similar fashion.
OpenSea has distanced itself from calling what Chastain did as insider trading.
“I do think there was a misframing of it as insider trading. We don’t view NFTs as financial assets, so that does not apply,” OpenSea CEO Devin Finzer told Decrypt in September.
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