By Tom Blitzer
Key Insights:
- Nate Chastain, a former OpenSea executive, has been found guilty of wire fraud and money laundering related to NFT insider trading.
- Chastain allegedly used confidential information to purchase NFTs before they were featured on OpenSea’s homepage and sold them at a profit.
- Prosecutors claim Chastain used anonymous accounts and wallets to conceal his actions, suggesting he knew he was violating company rules.
Former OpenSea executive, Nate Chastain, has been found guilty by a federal jury in New York for his involvement in what has been deemed the inaugural case of NFT insider trading. The Southern District of New York’s U.S. Attorney’s Office accused Chastain, who was charged with wire fraud and money laundering in June 2022, of planning to commit insider trading with NFTs.
Manhattan court delivers verdict in wire fraud case
As per a recent Reuters report, a federal jury declared Nate Chastain guilty of wire fraud and money laundering today. The verdict was delivered within a fortnight of the commencement of the trial at the Manhattan court. During the five-day-long legal proceedings, the defence counsel of the ex-OpenSea executive clashed with the prosecution team, resulting in his conviction.
The U.S. Department of Justice filed a legal action alleging that Nate Chastain, the former head of product at OpenSea, misused his position to gain an unfair advantage by leveraging confidential information. As a product manager, Chastain was responsible for handpicking the digital art pieces to showcase on OpenSea’s NFT marketplace homepage.
According to statements made by federal prosecutors, Chaitain has been accused of utilising personal knowledge to buy NFTs before they were made available on OpenSea’s homepage during the period spanning from June 2021 to September 2021. As soon as these NFTs were listed, their value skyrocketed, allowing Chaitain to sell them at a substantial profit. The prosecution claimed that this act of insider trading netted Chaitain over $50,000.
Prosecutors reveal Chastain’s shady tactics
Last month, attorneys representing Chastain filed a motion seeking to dismiss the lawsuit because there were no OpenSea policies or guidelines that prohibited the former executive from purchasing the NFTs. However, the prosecutors countered by emphasising Chastain’s use of anonymous accounts and wallets to conceal his actions, suggesting that he was aware of violating the company’s rules.
According to Damian Williams, the U.S. Attorney for the Southern District of New York, Nathaniel Chastain made profitable trades using his advanced knowledge of which NFTs would be featured on OpenSea’s website. The attorney added that even though the trades were made in novel crypto assets, Chastain’s conduct was fraudulent and lacked innovative qualities.