Nathaniel Chastain, the former Head of Product of the leading Ethereum NFT marketplace OpenSea has been indicted by a grand jury on wire fraud and money laundering charges.
Nate Chastain Indicted for Insider Trading
Chastain’s role in propelling OpenSea as the top Ethereum NFT marketplace has been critical. The former Head of Product at OpenSea played a crucial role in helping OpenSea establish its brand and become the home to virtually all highly rated NFT collections such as Bored Ape Yacht Club, CryptoPunks, Cool Cats, Azuki, and others.
However, things changed dramatically for Chastain last year when he was found to be actively engaging in insider trading on OpenSea for monetary benefits. Chastain was accused of using secret Ethereum wallets to buy NFTs based on confidential information that they would soon be featured on the OpenSea front page.
Chastain was arrested Wednesday morning in New York. The former OpenSea employee is slated to appear before the US District Court for the Southern District of New York, a press release issued by the US Department of Justice notes.
According to the indictment, Chastain was allegedly responsible for selecting NFTs that he knew would witness greater demand sometime in the near future on account of having exclusive information.
Notably, from June 2021 to September 2021, Chastain sold NFTs for two to five times his purchase price shortly after they surged in price after the OpenSea front-page exposure, the indictment notes.
It is worthy of note that Chastain’s actions were compared to frontrunning and insider trading. For the uninitiated, both these activities are when people closer to the organization possess some confidential information that could potentially affect the price of an asset. Essentially, by engaging in insider trading, people can profit off of non-public information.
While it’s no surprise that insider trading is strictly prohibited in the traditional financial markets, it was unclear until today how these laws would apply to NFTs.
"NFTs kënnen nei sinn, awer dës Zort vu kriminellen Schema ass net," sot den US Affekot Damian Williams an enger Ausso. "Wéi behaapt huet, huet den Nathaniel Chastain OpenSea verroden andeems hien seng vertraulech Geschäftsinformatioun benotzt fir Sue fir sech selwer ze maachen. D'Käschte vun haut weisen den Engagement vun dësem Büro fir den Insiderhandel auszedrécken - egal ob et op der Bourse oder der Blockchain geschitt.
In addition, FBI Assistant Director-in-Charge Michael J. Driscoll said the FBI “will continue to aggressively pursue actors who choose to manipulate the market in this way.”
Responding to Chastain’s arrest, an OpenSea spokesperson told crypto publication De Block:
"Als de weltgréisste Web3 Maartplaz fir NFTs, Vertrauen an Integritéit si Kär zu alles wat mir maachen. Wéi mir vum Nate säi Verhalen geléiert hunn, hu mir eng Enquête lancéiert a schlussendlech gefrot fir d'Firma ze verloossen. Säi Verhalen war an der Verletzung vun eiser Mataarbechterpolitik an am direkte Konflikt mat eise Kärwäerter a Prinzipien.
In recent news, crypto.news reported that OpenSea had introduced support for Solana NFTs. However, it has been unable to displace Magic Eden in the Solana NFT ecosystem as the leading NFT marketplace by trading volume.
Source: https://crypto.news/opensea-head-product-arrested-charged-nft-insider-trading-case/