Chastain has been accused of wire fraud and money laundering. he allegedly traded on sensitive information about a future listing on OpenSea – a digital marketing company for games., the Department of Justice said in a press release. The two charges each carry a maximum sentence of 20 years in prison.
This is the most high profile case to date but likely just the beginning. The news is bittersweet as these types of cases establish precedence for the new asset class but the length of the sentence if convicted would be as high as 40 years.
“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.” U.S. Attorney Damian Williams
This case concerns insider trading in NFTs on OpenSea, the largest online marketplace for the purchase and sale of NFTs. In violation of the duties of trust and confidence he owed to his employer, OpenSea, CHASTAIN exploited his advanced knowledge of what NFTs would be featured on OpenSea’s homepage for his personal financial gain.
As part of his employment, CHASTAIN was responsible for selecting NFTs to be featured on OpenSea’s homepage. OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage. After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially.
From at least in or about June 2021 to at least in or about September 2021, CHASTAIN used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured. After those NFTs were featured on OpenSea, CHASTAIN sold them at profits of two- to five-times his initial purchase price. To conceal the fraud, CHASTAIN conducted these purchases and sales using anonymous digital currency wallets and anonymous accounts on OpenSea.