May 5, 2023
By Sharan Kaur Phillora
Nathaniel Chastain, a former manager at OpenSea, was convicted by a jury of wire fraud and money laundering on Wednesday, May 3, marking the culmination of a landmark case with broad implications for the NFT industry. The case has been described as the first ‘insider trading’ prosecution brought within the NFT world.
Here’s what we know:
In June 2022, the Department of Justice charged Chastain with wire fraud and money laundering. A Twitter user first flagged the transactions in late 2021, and Chastain’s scheme was subsequently confirmed by OpenSea, which pledged to tighten its controls.
Chastain allegedly made over $50,000 by “using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage,” according to the FBI’s Michael Driscoll in a statement last year.
In closing arguments, Reuters reported that prosecutor Thomas Burnett said that Chastain “abused” his status at OpenSea, violating its confidentiality agreement.
Chastain’s lawyer, Daniel Filor, argued that he did not break any company rules with the trades.
OpenSea asked Chastain to resign in September 2021, when the NFT powerhouse additionally said it was putting in place new practices to prevent similar future internal lapses.
An OpenSea spokesperson previously told Blockworks that Chastain resigned because he was found to be “in violation of our employment policies and direct conflict with our core values and principles.”
Before the start of the trial, OpenSea CEO told prosecutors that the case against Chastain was “unfair” and that it impacted his mental health, according to court documents.
Chastain had filed five motions to drop evidence regarding his OpenSea compensation and exclude terms such as insider trading–arguing that NFTs are not securities. However, Judge Jesse Furman denied the motions and said that Chastain’s insider trading arguments were “moot” in April.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.