Former OpenSea executive convicted of insider trading involving NFTs
Nathaniel Chastain, the former head of product at OpenSea, has been found guilty of fraud and money laundering for exploiting his insider knowledge of which assets would be showcased on the NFT marketplace’s homepage to trade tokens.
According to reports, the ex-OpenSea executive accused of insider trading in NFTs was convicted on May 3 for wire fraud and money laundering by a federal court in New York.
Chastain, responsible for deciding which NFTs would be featured on the exchange’s homepage, was accused of buying NFTs he had chosen to feature and selling them shortly afterward to make over $50,000 in illegal profit.
The US Department of Justice has dubbed this case the first insider trading scheme involving digital assets. Insider trading refers to using confidential or privileged information for personal gain, leading to profitable transactions.
At the time of Chastain’s arrest, OpenSea was the largest NFT marketplace, attracting users keen to buy, sell or mint unique digital tokens linked to art or music, among other things. Recent data shows that over the past 24 hours, over $4.5 million in trades have occurred on the platform.
Chastain had pleaded not guilty to wire fraud and money laundering charges, but the jury was not convinced. The legal team representing the ex-OpenSea executive contended that the data he utilized was not privileged and further attempted to assert that NFTs did not qualify as securities, thereby warranting the dismissal of the case.
In a statement made last June, it was said by US Attorney Damian Williams that Chastain had exploited his advanced knowledge of which NFTs would be featured on OpenSea’s website to make profitable trades for himself. Williams added that, although the case involved trades in novel crypto assets, there was nothing particularly innovative about Chastain’s conduct–it was simply fraud.
Chastain faces up to 20 years in prison for each charge, although his sentencing date has yet to be determined.
This marks the first time a person has been found guilty of using privileged knowledge to trade NFTs. In a separate case, it’s worth noting that Ishan Wahi, a former Coinbase employee, and his brother Nikhil were also accused of insider trading of cryptocurrencies in July. Nikhil Wahi eventually pleaded guilty on September 12.