Former OpenSea employee arrested for insider trading of NFTs

NFTs made history, but maybe not in the way their advocates would have liked.

Nathaniel Chastain, a former OpenSea product manager, was arrested in New York City on Wednesday for insider trading. The Department of Justice called it the first ever digital asset insider trading scheme.

He has been charged with one count of wire fraud and one count of money laundered as a result of his NFT insider trading scheme.

NFTs are digital assets that represent artwork or other forms of media. The majority of aftermarket sales occur on OpenSea, the largest NFT marketplace platform.

According to the U.S. Attorney for the Southern District of New York Damian Williams, Chastain used his knowledge of what NFT projects were going to be featured on the Open Sea platform to make money.

As part of his position at OpenSea, Chastain was responsible for picking which NFT projects to feature on the marketplace's frontpage. According to the U.S. attorney, from June 2021 to September 2021, Chastain used confidential information about which NFTs would be featured to secretly acquire NFTs using anonymous accounts. This allowed Chastain to purchase these digital assets at low prices, before they spiked in value as a result of appearing on the frontpage of OpenSea. The purchase price for the NFTs was reported to be two-to-five times higher than the price that Chastain netted.

NFTs might be new, but this type of criminal scheme is not, according to the U.S. Attorney Damian Williams. Today's charges show the Office's commitment to stamp out insider trading, whether it occurs on the stock market or the internet.

The U.S. government has recently made it clear that it takes cryptocurrencies-related crimes more seriously. In February, a married NYC couple were arrested for their alleged involvement in the laundering of billions of dollars that were stolen in the Bitfinex hack.

If convicted, he could face 20 years in prison.