Prosecutors in Manhattan, NY charged a former product manager for OpenSea, Nathaniel Chastain, 31, with insider trading. Opensea is a non-fungible token (NFT) trading platform, which is also the largest NFT exchange in the world at the time of writing. This case is the first of its kind in regards to digital assets and traditions criminal activity investigations.
Prosecutors argue that the former product manager purchased 45 NFTs through anonymous hot wallets and accounts on the OpenSea platform and shortly after sold them for a profit. He allegedly purchased them right after they were featured on the exchange homepage and sold them at a profit directly after. As a product manager it would have been in his power to choose which NFTs were featured, giving him unheeded access to insider information that he created himself.
The claim addresses 11 separate executed trades, one of which was called “Spectrum of a Ramenfication Theory” created on Sept. 14, 2021, which sold the very next day by Chastain for almost 4x the buying price.
Chastain is being charged with money laundering along with wire fraud. Both sentences carry a maximum 20-year prison sentence. U.S. Attorney Damian Williams has said that his office will be committed to keeping up with similar activity on all NFT exchanges.
OpenSea has claimed they initiated their own investigation after learning about Chastain’s activities, and among finding out he did violate company policy, asked him to leave. After leaving, the now former product manager began his own project, Oval.
Recently, CEO of Coinbase, Brian Armstrong addressed the issues regarding similar allegations of insider trading, saying individuals involved could have been either connected to Coinbase or employees. Although the CEO did not mention that any disciplinary actions or criminal charges will be held against his employees, he did say that his platform was planning to revise the listing process to prevent it from happening.
