Nathaniel Chastain, a former head of product at NFT marketplace OpenSea who was sentenced to three months in prison for insider trading, has elected to serve his sentence while his appeal is pending.
Chastain's legal team filed a letter with a New York District Court on Wednesday, to inform the judge of his decision to withdraw his application for bail pending appeal.
As per the court's prior order, Chastain will self-surrender by November 2, commencing his prison sentence while his appeal process is ongoing.
OpenSea was once the world’s largest marketplace for NFTs—unique digital tokens linked to content, such as art or music, providing proof of ownership. In the past 24 hours, it saw trading volumes exceeding $2.4 million, second to rival marketplace Blur, which had trading volumes of more than $5 million, per DappRadar.
Chastain played a significant role at OpenSea, where he had control over determining which NFTs and collections would be featured on the platform's homepage. This exposure greatly increased the visibility of these NFTs, potentially affecting their prices.
To conceal his trades, Chastain allegedly created multiple digital wallets and accounts to acquire and sell NFTs that were set to be featured on the platform.
Insider trading refers to the illegal practice of buying or selling a publicly traded company's securities, such as stocks or options, based on non-public and confidential information typically known only to company insiders, such as executives, employees, or board members.
Insider trading is illegal in the majority of jurisdictions because it gives individuals an unfair advantage and undermines the principle of fair and transparent financial markets.
First-ever insider trading scheme involving digital assets
The insider trading allegations against the former OpenSea exec revolve around his purchase of 45 NFTs before featuring them on the marketplace and reselling these NFTs at a profit once their prices had appreciated.
The FBI and U.S. Department of Justice (DOJ) accused Chastain of illegally making more than $50,000 in profit from trading NFTs when he was arrested in June 2022. Back then, the authorities said it was the first-ever insider trading scheme involving digital assets. Chastain has since been ordered to return his ill-gotten gains.
Prosecutor Allison Nichols claimed that Chastain was fully aware that his actions constituted a violation of the law, as he used anonymous OpenSea accounts for his trades to conceal his identity.
Lawyers for the former OpenSea exec, however, argued that the information Chastain used was not confidential. They also insisted that NFTs are not securities and so the case ought to be dismissed.
Still, even though a judge was not convinced and let the case proceed to trial, Chastain, who initially faced up to 20 years in prison, got off lightly, with a sentence of just three months in prison.