The investigation involved the FBI and the newly formed National Cryptocurrency Enforcement Team.
- A former OpenSea product manager, Nathaniel Chastain, is being charged with wire fraud and money laundering in connection with a scheme to commit NFT insider trading.
- Chastain allegedly bought NFTs he knew were about to be featured on OpenSea’s homepage and sold them for up to five times his original price.
- He faces up to 40 years in prison.
Nathaniel Chastain, a former employee of OpenSea was arrested this morning on wire fraud and money laundering charges. The Department of Justice has charged Chastain with insider trading.
The “First Ever Digital Asset Insider Trading Scheme”
The U.S. Department of Justice (DOJ) announced today that former OpenSea product manager Nathaniel Chastain was being charged in the “first ever” digital asset insider trading scheme.
Chastain is charged with “wire fraud and money laundering in connection with a scheme to commit insider trading” of Non-Fungible Tokens (NFTs), according to the indictment submitted by United States Attorney Damian Williams and Federal Bureau of Investigation (FBI) Assistant Director-in-Charge Michael J. Driscoll.
The DOJ announcement stated that from June to September 2021 Chastain allegedly used his position at OpenSea to knowingly purchase dozens of NFTs before they featured on the company’s website’s homepage, and selling them for up to five times his original purchase price once they were displayed. Chastain allegedly tried to conceal his actions by using crypto wallets that were not associated with his name.
OpenSea is an NFT marketplace hosted on Ethereum. It was the first peer-to-peer marketplace for crypto collectibles including gaming items, digital art, and other virtual goods. It remains the largest such marketplace in the entire crypto space and has recently been valued at more than $13 billion following a Series C raise.
U.S. Attorney Damian Williams stated that “NFTs might be new, but this type of criminal scheme is not. 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.”
Chastain, who is thirty-one years old, was arrested this morning in New York. Each count with which he is charged carries a maximum sentence of 20 years in prison.
It appears the National Cryptocurrency Enforcement Team assisted the FBI and U.S Attorney’s Office in the investigation. The Department of Justice had announced the creation of such a unit in February 2022.
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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