FORMER OPENSEA EMPLOYEE TO GO ON TRIAL FOR NFT WIRE FRAUD AND MONEY LAUNDERING
Insider trading in emerging investment ecosystems is no new concept. In the early days of the printing press, iron ore trading, and Wall Street stock markets, people profited off their proximity to proprietary knowledge. Unsurprisingly, the NFT space is not insulated from this trend. And for the first time, a digital asset insider trading scheme is set for trial. Nathaniel "Nate" Chastain, 31, faces up to 40 years in prison after earning $65,000 through insider trading on OpenSea.
Chastain was the former Head of Product at OpenSea. A key responsibility of this role was choosing which NFTs would appear on OpenSea's homepage. Unfortunately, Chastain misappropriated this information. According to the indictment, he anonymously acquired several NFTs before they were publicized, then resold them for almost fivefold profit.
Charges laid against Chastain by the FBI include one count of wire fraud and one count of money laundering. Both of which have a maximum sentence of 20 years each. The popular discourse around this case has been over the term 'insider trading.' Likewise, there have been several differing opinions in the NFT community around what insider trading constitutes for assets like NFTs.
Even OpenSea CEO Devin Finzer stated, "I do think there was a misframing of it as insider trading. We don't view NFTs as financial assets, so that does not apply. That's a very specific term for a very specific thing."
Nonetheless, in view of Chastain’s resignation, OpenSea implemented two new employee policies. Team members are no longer allowed to buy or sell items from creators while OpenSea is featuring them. Additionally, "proprietary information" cannot be used to buy or sell any NFTs, whether they are available on the OpenSea platform or not.
This is the beginning of asset regulation in the web3 space. Most recently, three people - including a former Product Manager at Coinbase - have been charged in a cryptocurrency insider trading tipping scheme. The trio gained approximately $1.5 million after illegally trading 25 different crypto assets. The FBI is clearly keeping to their promise to “aggresively pursue actors who choose to manipulate the market.”
