The New York Department of Justice has announced that it will be charging a former OpenSea employee for alleged insider trading of NFTs.
The former employee was arrested and will be presented in the United States District Court for the Southern District of New York.
The charges cite that the Opensea employee used his role of selecting NFTs to feature on its homepage for his personal gain.
The U.S. Attorney’s Office of the Southern District of New York has announced that it will be charging a former OpenSea employee for alleged insider trading of NFTs on the popular Ethereum platform.
Former OpenSea Employee is Being Charged with Wire Fraud and Money Laundering in Connection to Insider Trading of NFTs
According to the official press release, the defendant, Nathaniel Chastain, was a former product manager at Ozone Networks: the parent company of OpenSea. Mr. Chastain is being charged with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens.
The press release by the Department of Justice further explains that Mr. Chastain used ‘confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.’
In addition, Mr. Chastain was in charge of selecting NFTs that feature on OpenSea’s homepage. The process was meant to be confidential, but he used the information between June 2021 and September 2021 to secretly purchase dozens of NFTs before they were featured. Chastain would then sell them at profits of two to five times his initial purchase price.
He also attempted to cover his tracks by conducting the purchases through anonymous digital currency wallets and anonymous accounts on OpenSea.
He was arrested earlier this morning and will be presented today in the United States District Court for the Southern District of New York.
Insider Trading Laws Apply to NFTs
U.S. Attorney Damian Williams further explained the seriousness of the charges by stating the following:
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.
Similarly, FBI Assistant Director-in-Charge Michael J. Driscoll added that NFTs are not immune to insider trading laws. He said:
In this case, as alleged, Chastain launched an age-old scheme to commit insider trading by using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage.
With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain. The FBI will continue to aggressively pursue actors who choose to manipulate the market in this way.