Nathaniel Chastain, a former product manager at non-fungible token (NFT) marketplace OpenSea was convicted on Wednesday of fraud and money laundering.
According to reports, the ex-head of product used inside knowledge of which assets would be featured on the marketplace’s homepage to trade NFTs. Prosecutors accused Chaistain of buying NFTs he had decided to feature on the OpenSea website and selling them shortly afterward to make more than $50,000 in illegal profit. Chastain will be sentenced at a later date but he faces up to 20 years in prison for each of the charges.
First Criminal Case Of NFT Insider Trading
The Department of Justice (DOJ) claimed it as the first criminal case of an insider trading scheme involving digital assets. In an argument, prosecutor Thomas Burnett implicated that Chastain who was in charge of choosing which NFTs would be featured on the website’s nonfungible token marketplace, abused his status to line his own pockets.
Nathaniel Chastain, the former product manager at OpenSea, was convicted on Wednesday of fraud and money laundering for using inside knowledge of which assets would be featured on its home page to trade NFTs. Reuters reported. He was accused of buying NFTs he had decided to…
— Wu Blockchain (@WuBlockchain) May 3, 2023
The former exec was arrested in connection with the fraud last year after he was caught purchasing the digital artworks and reselling them after they had been featured on OpenSea. As per the prosecutors, Chastain conducted these transactions with anonymous digital currency wallets and anonymous accounts on OpenSea, in order to cover his tracks. In his closing statement on Monday, Burnett said,
“He abused his status at OpenSea to line his own pockets, and he lied to cover his tracks.”
Chastain’s alleged bad practices first came to light when an anonymous thread on Twitter in September 2021 first revealed that he might be using insider information to purchase NFTs. Following the accusation, even OpenSea had confirmed that they learned one of their employees purchased items using confidential information, without disclosing if it was Chastain.
Hey @opensea why does it appear @natechastain has a few secret wallets that appears to buy your front page drops before they are listed, then sells them shortly after the front-page-hype spike for profits, and then tumbles them back to his main wallet with his punk on it?
— Zuwu (@0xZuwu) September 14, 2021
Disgraced NFT Execs Arrested
However, as the news blew up, Opensea admitted to Chastain’s wrongdoings, emphasizing its commitment to trust and safety on the platform. OpenSea representative Allie Mack had previously stated,
“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.”
This is not the first time an exec from the NFT space has been convicted of fraud and money laundering. In December, United States prosecutors arrested Rikesh Thapa, the former chief technology officer (CTO) of the NFT ticketing platform, Blockparty, on charges of stealing more than $1 million in cash and cryptocurrency from the company.