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Former OpenSea Exec Charged for NFTs Insider Trading

Former OpenSea Exec Charged for NFTs Insider Trading

Last updated 29th Jun 2022
Disclosure
  • It is the first time an insider trading charge involving digital assets has been pursued
  • Chastain traded dozens of NFTs between June 2021 to September 2021

Considered to be the first-ever indictment of insider trading in NFTs, Nathaniel Chastain, OpenSea’s former head of product has been charged by the United States Department of Justice with one count of wire fraud and one count of money laundering.

What we know

According to the Department of Justice, Chastain used confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.

He was subsequently arrested.

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. Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain.
US Attorney Damian Williams

Chastain sold dozens of NFTs with prior knowledge

From June 2021 to September 2021, Chastain used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured.

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.

FBI Assistant Director-in-Charge Michael J. Driscoll said Chastain allegedly 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.

With the emergence of any new investment tool, such as blockchain-supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain. The FBI will continue to aggressively pursue actors who choose to manipulate the market in this way
FBI Assistant Director-in-Charge Michael J. Driscoll

Each of the charges carries a potential maximum sentence of 20 years in prison.

OpenSea CEO admits fraud

Meanwhile, OpenSea has 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.

Murtuza Merchant

Murtuza Merchant

Murtuza Merchant is a senior journalist, having been associated with various publications for over a decade. An avid follower of blockchain tech and cryptocurrencies, he is part of a crypto advisory firm that advises corporates – startups and established firms on media strategies.