Ex-OpenSea employee charged with NFT insider trading
Former OpenSea product manager Nathaniel Chastain has been arrested on charges of NFT insider trading. He is said to have operated the illegal trade between June and September 2021.
Former OpenSea employee Nathaniel Chastain has been arrested and charged with insider trading illegally using data from the leading NFT platform.
Prior to his departure, Chastain was head of OpenSea’s product division and was responsible, among other things, for selecting which NFTs OpenSea would offer. With the inside knowledge his position offered, Chastain bought dozens of non-fungible tokens (NFTs) before listing them on the platform’s homepage.
Once an NFT is listed on a leading trading platform, the price usually shoots up. The platforms must keep information about proposed listings confidential to avoid market manipulation. Employees who purchase NFTs fully disclose all related data.
Insider trading was commercial
Chastain took advantage of the privileged information and benefited greatly from it. Between June and September 2021, the former employee acquired soon-hyped NFTs and later sold them for up to five times their original price. In particular, to cover his tracks, Chastain used anonymously registered crypto wallets and OpenSea accounts.
Nate is now facing multiple counts of fraud following a criminal complaint filed by the FBI in the US District Court for the Southern District of New York . FBI Assistant Director in Charge Michael J. Driscoll explained:
“In this case, Chastain… employed an age-old insider trading scheme, using his knowledge of confidential information to buy dozens of NFTs before they were published on OpenSea’s homepage.”
He also pointed out that there are always people in the market looking for illegal financial gain. Blockchain-backed assets like NFTs are no different. Coinbase itself was hit by similar insider trading allegations just two months ago. Binance was accused of the same thing last year, as well as market manipulation. According to reports, employees at these exchanges had bought coins before they were listed, only to sell them at horrendous profits after their price had risen.
Speaking to CoinDesk, a representative from OpenSea said:
“Chastain’s actions violate our employment policies and are in direct conflict with our core values and principles.”
In September last year, OpenSea boss Devin Finzer spoke about the “incredibly disappointing” insider trading allegations. However, he refrained from specifically mentioning Chastain. At the time, the employee put himself on display and said he regularly engaged in insider trading at OpenSea. His profits reached 19 ETH at the time.
In its statement last year, Finzer reported that OpenSea hired a third party to review the incident. She would also make recommendations on how to prevent the incident from happening again.
Chastain now faces up to 20 years in prison if found guilty. His case is the first the Justice Department is handling related to insider trading of digital assets.