First arrest for insider trading in NFTs
The FBI has arrested the former product manager of an NFT sales platform who allegedly took advantage of his position to buy crypto-assets before their value rose.
OpenSea is the largest platform specialising in the sale of NFTs. Between June and September 2021, its product manager, Nathaniel Chastain, allegedly took advantage of his position to buy crypto-assets shortly before they were featured on the platform’s homepage.
He would then have sold the NFTs for between two and five times their purchase price, before resigning in September 2021. OpenSea has launched an internal investigation against him: « His behaviour was in violation of our employee policies and in direct conflict with our core values and principles, » said a company spokesperson.
OpenSea referred the case to the judicial authorities and on 1 June 2022 the FBI arrested Nathaniel Chastain at his home. The Department of Justice charges him with wire fraud and money laundering. He faces up to 20 years in prison.
This is the first proven case of insider trading in the world of NFTs: « NFTs may be new, but this type of criminal scheme is not. (…) Today’s charges demonstrate the commitment of this Office to stamping out insider trading—whether it occurs on the stock market or the blockchain, » said U.S. Attorney Damian Williams.
« With the emergence of any new investment tool, such as NFTs, there are those who will exploit vulnerabilities for their own gain, » commented FBI Assistant Director-in-Charge Michael J. Driscoll.