Nathaniel Chastain, the former product manager of NFT trading platform OpenSea, was convicted on May 3 in New York federal court of money laundering and wire fraud. Each count carries a maximum prison sentence of twenty years. The sentence is set for August 22.
Chastain’s downfall was precipitated by a slew of online allegations that he regularly bought crypto digital assets from artists immediately before they appeared on OpenSea, knowing that their value would soon rise, and then sell them off at a huge profit. He was forced to resign in September 2021 after a Twitter user spotted his transactions online, thanks to the relative transparency of the NFT transfer process. The user contacted his employer directly, asking why a company employee “has a few secret wallets that seem [sic] to buy your front page drops before they’re listed, then resell them shortly after the front page hype peak for profit, then flip them back to his main wallet with his punk on it? The FBI arrested Chastain in June 2022.
According to the original indictment, Chastain between June and September 2021 earned approximately $57,000 by buying dozens of NFTs before their scheduled listing on OpenSea and selling them at two to five times the purchase price. In a notable trade, which took place on August 9, 2021, Chastain bought ten single-series NFTs before his promotion on the platform’s homepage, then sold them for up to three times what he was selling. paid for them.
At the time, there were no legal standards that applied to NFT trading. However, “although this case involved trading in new crypto assets, there was nothing particularly innovative about its conduct – it was fraud,” US attorney Damian Williams said in a statement. statement. The resolution of this case is likely to set a precedent regarding the hitherto largely unregulated trade in digital assets.
