OpenSea: Product manager sentenced for insider trading

Nathaniel Chastain, a former product manager at the world’s largest NFT trading platform OpenSea, has been convicted of insider trading. It’s not the first time a senior executive has used his knowledge to profit from crypto market movements.

OpenSea: Product manager sentenced for insider trading

Nathaniel Chastain was first arrested about a year ago. Allegations against him were first made in September 2021. Shortly thereafter, Chastain left OpenSea. Previously, he worked as a senior product manager for the NFT marketplace.

Now comes the guilty verdict. On Wednesday, a court convicted the 32-year-old of fraud and money laundering in New York. Chastain was responsible for presenting digital products on the OpenSea homepage.

There you will find new, hot NFT collections. It was Chastain who, until 2021, made the decision as to which collections were presented. Before that, he acquired NFTs of the collections. After the website was updated with the new projects, its price increased due to growing demand. Chastain capitalized on this by reselling his recently acquired NFTs.

In order not to attract attention, Chastain created anonymous blockchain addresses – at least that was his plan. Without using any additional intermediary to cover his tracks, he ended up sending funds back and forth between his public Ethereum address and his secret addresses, which he used for insider trading.

In September 2021, a careful user became aware of the fraudulent activity. He’d looked closely at Chastain’s transaction history. The dizziness flared up.

Every day that the former product manager was able to engage in insider trading brought in four-digit dollars, according to the Manhattan court. Overall, his profit is $50,000. The case marks the first US lawsuit alleging insider trading in cryptocurrencies.

Crypto is sensitive to insider trading

The court accuses Chastain of knowingly cheating. This is indicated by his approach to several different blockchain addresses, which he half-heartedly tried to keep anonymous.

“He abused his status at OpenSea to line his own pocket and lied to cover his tracks.” Explains prosecutor Thomas Burnett, as reported by Reuters .

Legal experts believe the ruling will set a precedent for future disputes. Because: Concrete laws that prohibit insider trading of digital systems do not exist in the USA so far.

Chastain and his defense attorney Daniel Filor also bet on this card. There were simply no internal company regulations that prohibited the use of the information. Therefore, the convict did not know that his actions were illegal.

“You can’t bind Nate to a standard that didn’t exist. No one has told Nate not to use or share this information.” Says Filor about his client.

Judge Allison Nichols is not convinced by this argument. So far, however, it is uncertain how high the penalty for former product manager Chastain will be. In February, a Coinbase product manager was sentenced to ten months in prison for a similar act.

In both cases, operational errors led to the perpetrators being caught. They were finally uncovered through research by private individuals. If the procedure had been professional, the illegal activities would not have been noticed. Because the crypto industry is sensitive to insider trading, the underreporting of such trades may be high.