Former OpenSea Manager Charged With Insider NFT Trading
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Former OpenSea Manager Charged With Insider NFT Trading
The US Attorney's Office for Manhattan has charged a former product manager at OpenSea, the largest marketplace for nonfungible tokens, with insider trading of a digital asset. This is a first for the Department of Justice.
On multiple occasions in 2021, Nathaniel Chastain allegedly secretly purchased NFTs before they were featured on OpenSea's homepage, only to resell them after the assets were placed on the front page, increasing their value dramatically, according to the indictment from the US Attorney's Office for the Southern District of New York that was unsealed Wednesday.
One of Chastain's responsibilities at the marketplace was to determine which NFTs would be featured, thus allowing him to allegedly exploit the system in order to make a profit.
"NFTs might be new, but this type of criminal scheme is not," said Damian Williams, US attorney for the Southern District of New York. "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."
The alleged incidents of insider trading took place between May and September 2021. Chastain knew which NFTs would be appearing on the front page of OpenSea, and before they were featured, it's alleged, he would buy them using dummy accounts he created. He would then sell them hours or days after, making double, triple or more than quadruple what he paid for them, the indictment said.
OpenSea says it took action when Chastain's schemes were revealed.
"When we learned of Nate's behavior, we initiated an investigation and ultimately asked him to leave the company," a company spokesperson said in an email statement Friday. "His behavior was in violation of our employee policies and in direct conflict with our core values and principles."
A charge of insider trading carries a maximum sentence of 20 years in prison. Chastain also was charged with money laundering for the transactions involving the NFTs, and that crime also carries a 20-year maximum sentence.
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