Former OpenSea Executive Convicted In First NFT Insider Trading Case
The U.S. Federal Government has secured its first conviction in an insider trading case involving non-fungible tokens (NFTs), cryptographic records…
The U.S. Federal Government has secured its first conviction in an insider trading case involving non-fungible tokens (NFTs), cryptographic records stored on a blockchain. Nate Chastain, a former executive at OpenSea, a popular NFT marketplace, was convicted of money laundering and wire fraud for using inside knowledge to profit from NFT trades.
Note that Chastain wasn’t convicted of insider trading because it’s yet unclear if digital tokens are legally considered securities. But he was found guilty of wire fraud and money laundering for buying NFTs he knew were about to be featured on OpenSea’s homepage and selling them for a higher price once they got featured. Prosecutors alleged Chastain made roughly $57,000 in profits from these trades.
- Rumors of Chastain’s insider trading emerged in September 2021 after a Twitter user observed wallets that purchased OpenSea’s front page drops before they were listed, sold them shortly after, and deposited the proceeds into Chastain’s publicly-known wallet.
- OpenSea confirmed the allegations shortly after, and Chastain stepped down as head of product at the company. Federal prosecutors filed charges against Chastain in June 2022, and the case went to trial this April. He was found guilty in a jury trial after three days of deliberation.
- Chastain’s lawyers argued that OpenSea did not consider the knowledge of the NFTs to be featured on its homepage as confidential information during his tenure. “You can’t hold Nate to a standard that didn’t exist,” his lawyer Daniel Filor said in his closing argument to jurors. However, that wasn’t enough to sway them.
After leaving OpenSea, Chastain founded a new NFT-related platform called Oval. He sought to raise a $3mn seed round from investors, but it’s unclear if he got any funding.
Chastain, 32, will be sentenced by a judge at a later date.