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OpenSea ex-employee becomes first to be charged with NFT insider trading

Posted on by admin
02
Jun
  • Former OpenSea product manager, Nathaniel Chastain, has been arrested with charges related to NFT insider trading.
  • The member is said to have carried out the fraudulent activity between June and September last year.

Former OpenSea employee Nathaniel (Nate) Chastain has been arrested and charged with conducting insider trading on the leading NFT platform.

Prior to his excision, Chastain was OpenSea’s head of product, tasked with selecting which NFTs OpenSea would feature. Using the advantage his position offered him, Chastain purchased dozens of non-fungible tokens (NFTs) before their listing on the platform’s homepage. 

As is the norm, once a certain digital asset gets listed on a leading trading platform, its price shoots up. Such platforms are charged with keeping information regarding these listings confidential to evade market manipulation. Employees purchasing NFTs are required to provide their full information, alongside their collectibles of interest.

Former OpenSea employee charged with insider trading

Using the privileged information, Chastain hugely profited. Between June and September 2021, the former employee acquired soon-to-be-hyped NFTs, then later flipped them at up to five times their original price. To cover his tracks, Chastain used confidential information, specifically anonymously registered crypto wallets and OpenSea accounts.

Nate is now charged with wire fraud and money fraud, according to the indictment that the Federal Bureau of Investigation (FBI) filed at the US District Court for the Southern District of New York. 

“In this case, as alleged, Chastain 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,” FBI Assistant Director-in-Charge Michael J. Driscoll said in a statement. 

Additionally, he noted that the market is always rife with people looking to make selfish financial gains. Blockchain-supported assets, such as NFTs, are no different. Coinbase itself has suffered similar allegations of insider trading as late as two months ago. Binance was accused of the same last year, in addition to market manipulation. Reports note that employees at these exchanges purchased coins before their listing only to dump them after their price hike.

Further notes

Speaking to CoinDesk, a representative from OpenSea said that Chastain’s acts were “in violation of our employment policies and direct conflict with our core values and principles.”

In September last year, OpenSea CEO Devin Finzer discussed the “incredibly disappointing” insider trading allegations. He however refrained from specifically mentioning Chastain. In the same month, CNF reported Chastain’s case. At the time, the employee openly flaunted himself, saying he regularly conducted insider trading on OpenSea. His profits at the time reached 19 ETH.

In his last year’s statement, Finzer reported that OpenSea had recruited a third party to review the incident. It would also draw recommendations on ways to avert its re-occurrence.

Read More: OpenSea admits that one of its employees was involved in NFT insider trading

Chastain now faces up to 20 years imprisonment if found guilty. His case is the first that the Justice Department will cover in relation to insider trading of digital assets.

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