Former OpenSea Employee Charged In First-Of-Its-Kind NFT Insider Trading Case

A former product manager at an NFT marketplace has been charged with wire fraud and money laundering in the first insider trading case involving non-fungible tokens.

Nathaniel Chastain, a former employee of OpenSea, is accused of using confidential information about which NFTs were going to be featured on OpenSea’s homepage to secretly buy the digital assets and then sell them for 2x to 5x the original price, according to a press release from the U.S. Attorney’s Office.

“As part of his employment, Chastain was responsible for selecting NFTs to be featured on OpenSea’s homepage,” the press release said. “OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage. After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially.”

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Chastain is accused of using anonymous digital currency wallets and anonymous accounts on OpenSea to buy and sell the NFTs, according to the statement from the U.S. Attorney’s Office. Chastain was arrested on Wednesday.

NFT market

NFTs exploded in popularity last year around the time Bitcoin was reaching new highs and there was increased interest in digital assets. VCs were quick to pour money into the arena, with more than $2.6 billion invested in the space over the past year or so, according to a Crunchbase analysis in March.

OpenSea is one of the most high-profile NFT marketplaces. Andreessen Horowitz and Y Combinator are among its backers. The company last raised a $300 million Series C co-led by Coatue and Paradigm in January. The Series C brought OpenSea’s valuation to around $13.3 billion, according to Crunchbase.