The US Justice Department has charged a former employee at OpenSea with money laundering and wire fraud related to NFT insider trading.
The employee allegedly used confidential business information regarding which NFT projects would be featured on the platform to make a considerable profit by buying those NFTs and reselling them after the feature. The official release stated this case was the first-ever digital asset insider trading scheme.
Insider Trading on OpenSea Allegation
The defendant and former OpenSea employee is 31 year old Nathaniel Chastain. Nathaniel was accused of secretly buying 45 NFTs in advance of them being featured on OpenSea’s homepage from last summer to September 2021, as reported by Reuters. Nathaniel was arrested on Wednesday, he is now facing one count of wire fraud and one count of money laundering, each count carries a maximum sentence of 20 years in prison.
According to the allegations, Chastain’s responsibilities with OpenSea included “selecting NFTs to be featured on OpenSea’s homepage.” The same homepage he is accused of puchasing NFTs early on and then selling once they appear on the homepage, which gives the NFT more exposure and notoriety. Many of the NFTs resold by Chastain were at a two to five time profit from the initial purchase price. The charges also allege that he used different anonymous digital wallets and OpenSea accounts to hide the transactions.
FBI Assistant Director-in-Charge Michael J. Driscoll considered Chastain’s offense an age-old insider trading scheme and added that the authority would continue deploying forces to target acts of market manipulation in the digital assets space.
“With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain. The FBI will continue to aggressively pursue actors who choose to manipulate the market in this way.”