A product manager at OpenSea, the largest online marketplace for non-fungible tokens, was charged with insider trading by US prosecutors in Manhattan on Wednesday.
OpenSea Employing in Insider Trading NFTs
Nathaniel Chastain, product manager at OpenSea—largest NFT marketplace on the internet, was accused of buying 45 NFTs in secret based on confidential information that they will be displayed on OpenSea’s homepage soon, and then selling them for a profit of two to five times what he spent.
Founded by Devin Finzer and Alex Atallah in 2017, OpenSea offers a marketplace that allows non-fungible tokens to be sold publicly through an auction or fixed price.
According to an indictment filed in federal court in Manhattan, Chastain operated the conspiracy from June to September 2021, using anonymous digital currency wallets and accounts at OpenSea. Chastain would buy an NFT in secret within the time period, shortly before OpenSea showcased it on the front page of its website. He allegedly planned to sell those NFTs “at profits of two to five times his initial purchase price” once they made it to the front page.
He used anonymous digital currency wallets and anonymous identities on OpenSea to hide his traces, according to the Department of Justice, which claims this happened thousands of times.
“NFTs might be new, but this type of criminal scheme is not,” said U.S. Attorney Damian Williams. “Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain.”
OpenSea Seeking Justice.
According to the Department of Justice, each offense carries a potential punishment of 20 years in prison.
Officials with the Department of Justice claim that this is the first time they have sought an insider trading prosecution involving digital assets. Chastain’s apparent scheme was rather straightforward.
Michael J. Driscoll, the FBI’s Assistant Director-in-Charge, says the bureau will continue to prosecute those who choose to manipulate the market in this fashion.
The start-up was relatively lenient with respect to limitations around employees accessing sensitive information to invest in NFTs until September 2021, when Chastain’s alleged unlawful conduct first came to light.
Since then, the company has implemented two new employee policies, including prohibiting OpenSea employees from purchasing or selling from collections or creators while they are being featured or promoted by the company, as well as prohibiting employees from “using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not.”
