Ex-OpenSea Manager’s trial begins in alleged insider trading scheme

The trial of ex-OpenSea product manager Nathaniel Chastain begins later this week, nearly a year since he was arrested in New York City for wire fraud. Chastain’s arrest came at the end of an FBI investigation into his non-fungible tokens (NFT) trading, who alleged that he had secretly bought NFTs and resold them for two to five times their original value.

Prosecutors allege Chastain used the business information on Open sea to find out which tokens will have the highest value and will be featured on the company’s website and use the information to make money. The trial is the first criminal insider trading case involving NFTs, according to Reutersbut United States Attorney Damian Williams said in a June 1 archiving“NFTs may be new, but this type of criminal scheme is not.”

OpenSea is the largest online marketplace for buying and selling NFTs, and Chastain’s lawyers argued at a pretrial conference Thursday that Chastain’s actions did not amount to insider trading, as the information obtained did not add value to OpenSea. “We’re not talking about securities trading,” said Chastain’s attorney David Miller, adding, “There is a significant risk of undue prejudice and jury confusion.”

Contrary to Miller’s claims that Chastain had committed no crime, indictment filed in May of last year, OpenSea said its employees must maintain the confidentiality of all business information and had “an obligation to refrain from using such information, except for the benefit of OpenSea or to the extent necessary to perform work for OpenSea.” The indictment states that Chastain had signed a written agreement with OpenSea when he began working for the company and had acknowledged those obligations in the agreement.

Chastain allegedly sold the NFTs from June 2021 until at least September 2021, and according to the indictment, in one instance Chastain had bought four of “The Brawl 2” NFT tokens just minutes before it was published on OpenSea’s website, and sold them for double much amount he bought them for within hours.

He allegedly used several anonymous accounts and digital wallets to fly under the radar during the buying and selling of the NFTs. FBI Assistant Director-in-Charge Michael J. Driscoll said in the June filing: “In this case, as alleged, Chastain launched an ancient scheme to commit insider trading by using her knowledge of confidential information to purchase dozens of NFTs in advance of they are featured on OpenSea’s website.” He added that “the FBI will continue to aggressively pursue actors who choose to manipulate the market in this way.”

Chastain is charged with one count of wire fraud and one count of money laundering. His trial is expected to last one to two weeks and, if convicted, he faces a maximum of 20 years in prison.

OpenSea did not immediately respond to Gizmodo’s request for comment.