Nathaniel Chastain was involved in the world’s first case of insider trading in digital assets, a crime that took place on OpenSea.
Former OpenSea product manager arrested: the world’s first NFT insider trading case
Yes. Insider trading does not only exist in the movies and in the world of traditional finance, imbued with fear, shouting, uncertainty and greed. From the stock market, where the phenomenon is most present, it has moved to NFTs, an area still to be explored, just like the overall blockchain sector.
This turns out to be the first-ever case of insider trading involving a digital asset.
Nathaniel Chastain, the former product manager of OpenSea, was arrested by the FBI and charged with wire fraud and money laundering in connection with insider trading of Non-Fungible Tokens.
As released by the US Department of Justice, Chastain allegedly bought a dozen NFTs belonging to a collection that was about to be placed on the OpenSea homepage. Nathaniel then allegedly exploited confidential information in his possession to make a profit by subsequently selling it for about five times the price paid.
Part of his job was to select the most promising NFT collections for inclusion on the OpenSea homepage. As a result, he was certainly in a favourable position to know well in advance the future value of the asset or even the entire collection to which it belonged.
The fact that some NFTs are added and listed on OpenSea, the world’s largest marketplace, is comparable to the listing of a cryptocurrency on major exchanges, such as Coinbase or Binance. The same reasoning can be applied to a tech stock being added to the Nasdaq 100 stock index.
It is inevitable, therefore, that at least in the short term, enough hype is created around the collection to multiply its perceived market value.
Insider trading and the charges against Nathaniel Chastain
Damian Williams, the US Attorney for the Southern District of New York, 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 has pleaded not guilty and could “get away” with a $100,000 bail. However, he could risk up to 20 years in prison if convicted, according to information released by Prosecutor Williams.
There is still a lot of investigating to be done, but certainly the former OpenSea employee is involved in some way. One will probably have to wait a long time to know the outcome of the case, as these types of trials tend to take years.
For now, Nathaniel Chastain has been ordered to return to court on 15 June. He will have to appear for the first time before US District Judge Jesse Furman.