Arrest of Former OpenSea Executive Marks First Case of NFT Insider Trading

Over the past week, the U.S. Attorney’s Office in the Southern District of New York (SDNY) issued a press release announcing the arrest of a former executive at the prominent NFT marketplace OpenSea. Nate Chastain, previously the platform’s Head of Product, was charged “with wire fraud and money laundering in connection with a scheme to commit insider trading.”

OpenSea removed Chastain from his position earlier in September 2021 after he admitted to front-running sales — purchasing NFTs that were about to be featured on the homepage — on the platform. Various NFT buyers discovered the former executive’s actions after analyzing his transactions on the Ethereum blockchain. Unfortunately, OpenSea did not have policies in place for this type of behavior at the time. Since then, the platform has enforced new rules upon employees.

This particular incident marks the first case of insider trading of digital assets. The Justice Department’s documents claim that Chastain laundered at least 45 NFTs throughout 2021. The former executive then made a profit of two to five times the initial purchase price of the tokens. Both the Justice Department and SDNY U.S. Attorney’s Office have been ramping up their efforts to prosecute crimes within the crypto industry.

“NFTs might be new, but this type of criminal scheme is not,” explained U.S. Attorney Damian Williams. “s 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.”

In response, a spokesperson of OpenSea likewise affirmed that it will take the necessary actions to prevent such incidents from occurring in the future. “As the world’s leading web3 marketplace for NFTs, trust and integrity are core to everything we do. When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company. His behavior was in violation of our employee policies and in direct conflict with our core values and principles.”

Sources: CNBC, TechCrunch