- Former OpenSea product head Nathaniel Chastain has been sentenced to three months in prison for insider NFT trading.
- Chastain secretly bought NFTs before they appeared on OpenSea’s homepage, making substantial profits.
- CEO argued it wasn’t insider trading, but the Department of Justice disagreed, leading to Chastain’s conviction.
Nathaniel Chastain, the former head of product at NFT marketplace OpenSea, yesterday received a three-month prison sentence for leveraging insider information from the exchange to profit from assets showcased on its homepage. Convicted of fraud and money laundering in May, Chastain, who played a pivotal role in selecting NFTs for prominent display on OpenSea, had the potential to face up to 20 years in prison for each charge. Chastain had denied the charges but was found guilty earlier this year.
Two Years in the Making
Chastain’s dealings with the law date back to September 2021 when Twitter user @0xZuwu revealed that the then product manager was also managing undisclosed crypto wallets linked to the purchase and subsequent sale of obscure NFTs upon their inclusion on OpenSea’s front page, resulting in significant profits for him.
OpenSea promptly launched an investigation, leading to Chastain’s resignation before any termination. CEO Devin Finzer attempted to downplay the situation, asserting that the activities should not be classified as insider trading. He argued that since NFTs were not regarded as financial assets by the company, the term shouldn’t apply.
FBI Investigated Claims
The Department of Justice took a different stance, however, and an FBI inquiry exposed that Chastain had utilized confidential company information to secretly acquire numerous NFTs shortly before they gained prominence on the homepage over a four-month period in 2021.
Chastain’s attorney, David Miller, attempted to invalidate the charges by contending that the NFTs in question weren’t securities or commodities and weren’t legally considered the platform’s property. Miller also accused the government of misapplying criminal law to establish a precedent in the digital asset space and claimed they were attempting to regulate the entire market through Chastain’s case.
