A former product manager at OpenSea, the largest non-fungible token (NFT) marketplace, was found guilty of one count of wire fraud and one count of money laundering. Each count carries a maximum prison sentence of 20 years, according to a Justice Department press release. Federal prosecutors say the conviction marks the first case of insider trading involving NFTs, Reuters reports.
“Nathaniel Chastain leveraged his advanced knowledge of NFTs that would be featured on the OpenSea website to make profitable trades for himself,” U.S. Attorney for the Southern District of New York, Damian Williams, said in a statement. “Although this case involved trading in new crypto assets, there was nothing particularly innovative about its conduct – it was fraud.”
In June last year, the US Attorney’s Office in Manhattan charged Chastain after the former employee’s suspicious dealings were leaked on Twitter. The post revealed that Chastain had used anonymous OpenSea accounts to acquire NFTs that he knew would appear on the market’s homepage and subsequently increase in value.
After buying the digital tokens and waiting for their value to rise, Chastain then sold the NFTs, racking up over $50,000 in illegal profits, Reuters reported. Chastain pleaded not guilty.
Throughout the lawsuit, his lawyers argued that Chastain did nothing wrong since OpenSea never stipulated that prior knowledge of the assets that would be featured on the platform’s homepage was considered confidential. OpenSea — which was valued at $13.3 billion last year — says he has since introduced new policies to prevent team members from engaging in illegal trading in the future.
Prosecutors have pointed out that Chastain’s use of secret accounts to hide his dodgy trades proves he knew he was committing a crime.
“He abused his status at OpenSea to line his own pockets and he lied to cover his tracks,” federal prosecutor Thomas Burnett said in his closing statement earlier this week, according to information from Reuters.
David I. Miller, the attorney representing Chastain, responded to Hyperallergicwith the following statement: “We respect the jury process and appreciate the time and effort of the jury. However, we disagree with the jury’s verdict and are weighing our options. »
OpenSea has not yet responded to a request for comment.
