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OpenSea claims that the team was aware of Chastain’s insider trading activities, and it commenced an investigation. Also, the marketplace asked the executive to leave for violating the company’s policy.
The FBI and Department of Justice (DOJ) have arrested and charged an OpenSea executive, Nathaniel Chastain, with NFT insider trading. The 31-year-old was a product manager at the largest non-fungible token (NFT) marketplace, selecting NFTs that would feature on OpenSea’s homepage.
According to the DOJ, the OpenSea former employee was charged in a first-ever NFT insider trading scheme. US prosecutors in New York’s Southern District said Chastain used confidential information about the NFTs that would be on the OpenSea homepage to his advantage. His action led to his arrest in New York on the 1st of June.
Shedding more light on the situation, FBI Assistant Director-in-Charge Michael J. Driscoll explained:
“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.”
DOJ Charges Former OpenSea Employee with NFT Insider Training
US Attorney Damian Williams acknowledges that insider trading has been in existence even before the inception of digital collectibles. The attorney maintained that Chastain betrayed his former workplace, OpenSea, by engaging in NFT insider trading. The former product manager used confidential business information for personal financial gains, and he is now facing legal charges. Williams added that these charges signify the DOJ’s effort to combat insider trading. He also extolled the contributions of the FBI and the National Cryptocurrency Enforcement Team.
The NFT insider trading allegation against Chastain is that he bought dozens of NFTs before they could go live on OpenSea. The DOJ stated that Chastain used confidential information to his advantage in purchasing the NFTs around June to September 2021. When the NFTs were featured on OpenSea, he sold them at two to five times more than the purchase price. The DOJ press release added that Chastain covered his NFT insider trading act by performing illegal purchases and sales with anonymous accounts on OpenSea. Also, he used anonymous digital currency wallets in buying and selling the NFTs.
Chastain is charged with one count of wire fraud and one count of money laundering. If found guilty, he could be facing up to 20 years of imprisonment.
OpenSea claims that the team was aware of Chastain’s insider trading activities, and it commenced an investigation. Also, the marketplace asked the executive to leave for violating the company’s policy. Chastain left shortly after and started working on his own project Oval.