OpenSea’s former head of product was today convicted of fraud and money laundering for using inside knowledge of which assets would be featured on the marketplace’s homepage to trade NFTs.
Nathaniel Chastain, 32, was accused of buying NFTs he had decided to feature on the OpenSea NFT trading platform. Prosecutors alleged that Chastain then sold them shortly afterward to make more than $50,000 in illegal profit.
The U.S. Department of Justice called the case against Chastain the first insider trading scheme involving digital assets.
Insider trading is using confidential information to one’s benefit in order to make lucrative trades.
OpenSea, at the time of Chastain’s arrest, was the largest NFT marketplace. Users can buy, sell or mint unique digital tokens linked to content, such as art or music, providing proof of ownership.
Over $4.5 million in trades took place over the past 24 hours on OpenSea, according to DappRadar data today.
Chastain was the head of product at the website and was responsible for deciding which NFTs would be featured on the exchange’s homepage.
But last June, the DOJ and FBI arrested and charged him with wire fraud and money laundering, accusing him of making trades using his insider knowledge. Chastain pleaded not guilty to the charges.
Lawyers for the former OpenSea exec argued that the information Chastain used was not confidential and also tried to argue that NFTs are not securities and so the case ought to be dismissed. A jury was not persuaded.
U.S. Attorney Damian Williams said in a statement last June that Chastain “exploited his advanced knowledge of which NFTs would be featured on OpenSea’s website to make profitable trades for himself.”
“Although this case involved trades in novel crypto assets, there was nothing particularly innovative about his conduct—it was fraud,” Williams added.
Chastain will be sentenced at a later date but he faces up to 20 years in prison for each charge.