- Opensea insider trader Nathaniel Chastain has been found guilty of wire fraud and money laundering
- Chastain used inside information to buy up NFTs before they hit the Opensea front page and selling them for profit
- He faces a spell in prison for his actions
Former Opensea employee Nathaniel Chastain has been found guilty of insider trading and will now face a prison sentence. Chastain was accused of buying up NFTs from collections that were about to be splashed all over the exchange’s front page and selling them for a profit when they did, using his knowledge of these upcoming collections to commit his fraud. Chastain is said to have made more than $50,000 in illegal profit, with his argument that the information he used to make the sales wasn’t confidential falling on deaf ears.
NFT Activities Didn’t Go Unnoticed
Chasiatin’s activities were highlighted in September 2021 when Twitter user @0xZuwu discovered that was in charge of secret crypto wallets which showed a clear pattern of buying up unknown NFTs before selling them again after they were added to Opensea’s front page, often making thousands of dollars in profit with each one.
OpenSea were quick to investigate, with Chastain quitting before he could be fired, although CEO Devin Finzer tried to calm the waters by claiming that the activities should not be classed as insider trading, saying in an interview that “there was a misframing of it as insider trading”, adding that because the company didn’t view NFTs as financial assets, the term should not apply.
The Department of Justice felt differently however, with an FBI investigation into the affair discovering that for around four months in 2021, Chastain used confidential business information from Opensea to “secretly purchase dozens of NFTs shortly before they were featured” on the homepage.
Miller’s Arguments Fall Flat
Chastain’s lawyer, David Miller, tried to argue that the charges were invalid in part “because the NFTs at issue are neither securities nor commodities” and because the NFTs were not legally considered the platform’s property. He also accused the government of applying “ill-founded applications of criminal law to set precedent in the digital asset space”, and accused them of using Chastain’s case to regulate the entire market.
Chastain was convicted of wire fraud and money laundering and will be sentenced later this year.
