NFT and Alleged Insider Trading: First Charges Raised Regarding Digital Assets

By Catherine Thorbecke, CNN Business

A former employee of digital market OpenSea has been targeted by the first-ever charges related to an alleged insider trading scheme involving digital assets, authorities announced earlier this week.

Nathaniel Chastain, a former product manager at OpenSea, was charged on Wednesday with one count of wire fraud and one count of money laundering related to the buying and selling of non-fungible tokens (NFTs), the prosecutors from the U.S. Attorney’s Office for the Southern District. of New York said in a statement. The charges stem from an apparent scheme to engage in insider trading “using confidential NFT information that was to be featured on OpenSea’s homepage for his personal financial gain,” the statement added.

“NFTs may be new, but this type of criminal scheme is not,” said Damian Williams, U.S. Attorney for the Southern District of New York.

Chastain, 31, was responsible for selecting NFTs to feature on OpenSea’s homepage as part of his job, prosecutors said. The price buyers were willing to pay for an NFT, or those created by the same creator, typically increased significantly after they appeared on the OpenSea homepage.

Raleigh startup raises millions to ‘revolutionize’ how businesses can use NFTs and blockchain

NFTs are digital works of art or collectibles that use blockchain technology to prove ownership and individuality. While NFTs have exploded in popularity in recent years, their mainstream emergence has also been plagued with a number of controversies.

Chastain allegedly used OpenSea’s confidential business information to secretly purchase dozens of NFTs shortly before they were presented. He then allegedly sold them for a profit of “two to five times his original purchase price”, authorities said, and used anonymous digital currency wallets and anonymous accounts on OpenSea to “cover up the fraud”.

Chastain was arrested in New York on Wednesday morning, the statement added. He did not immediately respond to CNN Business’ emailed request for comment. OpenSea told CNN Business in a statement that it launched an investigation and ultimately asked Chastain to leave the company. “His behavior was in violation of our employee policies and in direct conflict with our core values ​​and principles,” the company added.

“As alleged, Nathaniel Chastain betrayed OpenSea by using his confidential business information to make money for himself,” Williams said and added that the charges demonstrate his office’s commitment to “eliminate the torts of insiders – whether they happen on the stock market or the blockchain.”

The-CNN-Wire™ & © 2022 Cable News Network, Inc., a WarnerMedia company. All rights reserved.

Comments are closed.