HomeNFTOpenSea: the insider trading case involving NFTs continues

OpenSea: the insider trading case involving NFTs continues

In June, OpenSea was indicted for the first alleged case of insider trading on the part of one of its managers related to the world of NFTs.

While the NFT market continues its descent (-80% compared to the previous quarter), as evidenced also by the recently released report on the subject, and which refers to the third quarter of the year, the first sensational case of insider trading breaks out.

The case specifically concerns the largest platform dedicated to the NFT market, namely OpenSea. Thirty-one-year-old Nathaniel Chastain, product manager of what is perhaps the world’s best-known NFT marketplace, OpenSea, who resigned when he was caught using insider information to profit from auctioning NFT products.

The charges against OpenSea for insider trading on NFTs

The allegation would involve the suspicious buying and selling of 45 works between June and September 2021. Chastain has clearly denied any charges, although he immediately left OpenSea out of fairness to avoid dragging it into his judicial issues. According to the charges brought by the Justice Department of the Southern District of New York, an arrest warrant was issued for the former OpenSea manager (in the US the rules against insider trading are very strict). 

This would be the first insider trading case related to the NFT market and the first time that an insider trading case involving a digital asset such as NFTs has been prosecuted. 

The fact that the sector still lacks precise and clear regulation must have made it much easier for Chastain, who was precisely in charge of selecting new works to eventually be put on the platform. He had a role that allowed him to be the first to see works that were unknown to most, but could also have potentially great value.

And it is here that the idea of operating what is commonly referred to as precisely insider trading must have been sparked in his mind, which is to take advantage of confidential upfront news about a particular company in order to speculate on it by trading its securities.

Insider trading on NFTs: the OpenSea case

The mechanism used by Chastain was very simple and consisted of buying works on his behalf, before they were auctioned on OpenSea, and then reselling them at a greatly increased price (as much as five times higher). 

When OpenSea became aware of the modus operandi of its 31-year-old product manager, it did not think twice about reporting him to the relevant authorities and forcing his resignation (according to what is a credible reconstruction made by some inside sources). He now faces up to 20 years in prison.

OpenSea closes deals to increase security

On the other hand, OpenSea has just closed a partnership agreement with fintech company Web3 Builders to launch Trust Check, a new system to combat the ever-increasing number of scams being carried out with cryptocurrencies. 

Meanwhile, from a market perspective, a few days ago on OpenSea there was the first case of the sale of a house on its platform, which sold for about $180,000

To carry out this sale, an LLC (Limited Liability Company) was allegedly established, which would have possession of the property. Through the purchase of the NFT, ownership was simultaneously transferred to the buyer on OpenSea.

Vincenzo Cacioppoli
Vincenzo Cacioppoli
Vincenzo was born in Genova but lived most of his life in Milan. He has a degree in political science. He is a journalist, blogger, writer, and marketing and digital advertising expert. After a long experience in traditional marketing, he started working with the web and digital advertising in 2011, creating a company called Le enfants. Passionate about the web and innovation, in 2018 he started exploring the topics related to blockchain technology and cryptocurrencies. Independent cryptocurrency trader since March 2018, he now collaborates with companies in the sector as a content marketing specialist. In his blog. mediateccando.blogspot.com, he has long been primarily focused on blockchain, which he considers to be the greatest technological innovation after the Internet. His first book about blockchain and fintech is scheduled for release in November.