U.S. authorities brought the first ever insider trading case involving digital assets as they charged a former employee at non-fungible token (NFT) exchange OpenSea with wire fraud.
Nathaniel Chastain, a former product manager with OpenSea, was arrested and charged with one count of wire fraud and one count of money laundering in connection with an alleged scheme to profit from inside information regarding NFTs. The allegations have not been proven.
According to an indictment that was unsealed in a New York federal court on Wednesday, Chastain was responsible for selecting the NFTs that would be featured on OpenSea’s home page. The identity of these tokens was kept confidential until they were featured, which usually resulted in their prices rising.
U.S. authorities alleged that, on 11 occasions, Chastain used his advance knowledge of the NFTs that would be featured to anonymously buy them ahead of time.
“After those NFTs were featured on OpenSea, Chastain sold them at profits of two to five times his initial purchase price,” the government alleged.
“NFTs might be new, but this type of criminal scheme is not,” said Damian Williams, the U.S. attorney for the Southern District of New York, in a statement. “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,” he added.