Nathaniel Chastain, a former product manager at non-fungible token (NFT) marketplace OpenSea, has been convicted in what United States federal prosecutors described as the first insider trading case involving digital assets.
Chastain was arrested in June and charged by the U.S. Department of Justice (DOJ) with fraud and money laundering for using confidential information about what NFTs were going to be featured on OpenSea’s website for personal financial gain.
What Happened?
As alleged by the department, the former manager took advantage of his employment role in OpenSea to commit the crime by using confidential information about what NFTs were about to feature on the platform’s website before they were officially released.
According to the DOJ, Chastain was in charge of selecting NFTs to be featured on OpenSea’s homepage. After making these decisions, he secretly purchased dozens of these assets and then resold them at profits of two to five times his initial purchase price after they had been featured, the department said. He allegedly made about $50,000 from the scheme.
“Nathaniel Chastain exploited his advanced knowledge of which NFTs would be featured on OpenSea’s website to make profitable trades for himself. Although this case involved trades in novel crypto assets, there was nothing particularly innovative about his conduct — it was fraud,” Damian Williams, the U.S. Attorney in Manhattan, said in a statement.
Arguments in Chastain’s Case
Following the verdict, Chastain’s lawyer, David Miller, said that the legal team would evaluate their options, according to a Reuters report on May 3.
“We respect the jury process. We respectfully disagree with their decision,” Miller said.
His legal team argued that OpenSea did not treat knowledge of what NFTs would be featured on its website as confidential information when Chastain worked at the firm. His lawyer Daniel Filor told jurors on Monday that nobody told Chastain that he could not use or share that information. Thus, he can not be held to a standard that did not exist.
Prosecutor Allison Nichols stated that the ex-manager used anonymous OpenSea accounts to make the illegal trades, which indicates that he knew that what he was doing was wrong.
U.S. District Judge Jesse Furman, who is presiding over the case, has scheduled Chastain’s sentencing date for August 22, 2023.
