OpenSea crook jailed for NFT insider trading

In the first case of its kind, a former employee of OpenSea, the largest digital trading platform for buying and selling non-fungible tokens (NFTs), has been jailed for three months.

Nathanial Chastain, 31, of New York City, abused inside knowledge he was privy to as an NFT listings selector for OpenSea to secretly purchase dozens of digital art tokens before their due feature date.

He carried out his fraudulent scheme between June and September 2021, netting an undisclosed sum of money in the Ethereum cryptocurrency.

It is standard policy of OpenSea to keep secret the identity of NFTs it puts up on its home page until the listings go live. Being featured on the homepage can considerably increase the prestige and therefore price of a particular NFT, so insider knowledge can help to identify tokens with future value and snap them up first. In exploiting his privileged access to information, Chastain thus effectively defrauded the NFT community and betrayed his employer.

“OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage,” said the US Department of Justice, announcing the sentence. “In violation of the duties of trust and confidence he owed to his employer, Chastain exploited his advanced knowledge of what NFTs would be featured on OpenSea’s homepage for his personal financial gain.”

In addition to his prison sentence, Chastain faces another three months under house arrest and must forfeit all the profits from his illegal scheme as well as pay a $50,000 fine. He has also been previously convicted of wire fraud and money laundering.

Welcoming the successful conclusion of the FBI-led investigation into Chastain’s wrongdoings, US attorney Damian Williams said: “Today’s sentence should serve as a warning to other corporate insiders that insider trading – in any marketplace – will not be tolerated.”

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