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Former OpenSea executive charged in first-ever NFT insider trading case

Federal prosecutors allege Nathaniel Chastain abused insider information to profit off of the tokens

The Bored Ape Yacht Club non-fungible token (NFT) collection on the OpenSea marketplace. (Tiffany Hagler-Geard/Bloomberg News)
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Federal prosecutors in New York charged a former executive at OpenSea, the largest marketplace for non-fungible tokens, with insider trading in what authorities said is the first such case involving digital assets.

Nathaniel Chastain, formerly OpenSea’s head of product, is charged with buying dozens of digital collectibles known as NFTs based on advanced knowledge they would soon be featured on the platform’s homepage, then selling the assets for up to five times what he paid for them.

“NFTs might be new, but this type of criminal scheme is not,” U.S. Attorney for the Southern District of New York Damian Williams said in a statement. “Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain.”

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Chastain, 31, was arrested Wednesday morning in New York. He faces one count of wire fraud and one count of money laundering, charges that each carry a maximum 20-year sentence.

Prosecutors allege Chastain, who was responsible for selecting which tokens OpenSea featured, launched the scheme in June of last year. He used anonymous accounts on OpenSea and anonymous cryptocurrency wallets to try to hide his tracks, prosecutors said. But crypto sleuths caught on in September, calling out Chastain and the company on Twitter. OpenSea responded at the time by launching an investigation, then requesting and accepting Chastain’s resignation.

“As the world’s leading web3 marketplace for NFTs, trust and integrity are core to everything we do,” an OpenSea spokesperson said in a statement. “When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company. His behavior was in violation of our employee policies and in direct conflict with our core values and principles.”

The five-year-old company was valued at $13.3 billion in January, based on a $300 million round of venture capital funding it announced at the time. It has drawn major buzz even beyond crypto industry circles as NFTs became a cultural juggernaut over the last year — and drawn investments from Dallas Mavericks owner Mark Cuban, basketball star Kevin Durant, and actor and entrepreneur Ashton Kutcher.

Spending on the tokens, which investors use to prove ownership of digital art and other media, vaulted from $106 million in 2020 to roughly $40 billion last year. But the market appeared to be cooling this year, even before a broader collapse in digital asset prices last month. NFT transaction activity fell from $3.9 billion in mid-February to $964 million in mid-March, its lowest weekly level since August, according to a report by crypto analytics firm Chainalysis.