First NFT insider trading trial results in guilty verdict for former Opensea boss

Former OpenSea product manager Nathaniel Chastain has been found guilty of wire fraud and money laundering in the first insider trading trial involving non-fungible tokens (NFTs).

A federal court in Manhattan, New York handed down the verdict Wednesday after a week-long trial and two days of deliberations, Bloomberg reported Thursday.

Chastain was accused of using confidential information to make thousands of dollars by buying NFTs just before they were listed on OpenSea’s website, where their prices would immediately increase.

Once prices had increased, Chastain would then sell the NFTs at a profit, violating his duty to keep the information confidential.

The government alleged that Chastain earned over $57,000 from her illegal acts.

Unlike most traditional insider trading cases, prosecutors charged Chastain with wire fraud, not securities fraud. That was because the US government has yet to rule on whether NFTs are legally classified as a security.

Chastain had previously argued that NFTs are not securities or commodities and therefore not subject to the government’s theory. He also claimed that he did not commit money laundering because the transactions were made on a public blockchain.

A group of more than 300 defense attorneys filed a letter in support of Chastain’s request to throw out the indictment, saying a finding that confidential business information is property would expand how fraud is prosecuted and “criminalize a wide range of conduct.”

However, US prosecutors fought back, noting that he used confidential information for personal financial gain.

“Although this case involved the trading of new cryptoassets, there was nothing particularly innovative about his conduct – it was fraud,” said Manhattan US Attorney Damian Williams.

Chastain faces up to 20 years in prison

Chastain faces up to 20 years in prison on both counts of fraud and money laundering, although his sentence could be reduced.

U.S. District Judge Jesse Furman, who presided over the trial, set Chastain’s sentencing date for Aug. 22.

“We respect the jury process,” said David Miller, one of Chastain’s attorneys. “We respectfully disagree with their decision and will consider our options.”

As reported, an anonymous thread on Twitter in September 2021 first revealed that Chastain might be using inside information to buy NFTs.

Subsequently, OpenSea confirmed that it learned that one of its employees purchased goods using confidential information, without disclosing that it was Chastain.

He was arrested in June last year.

Chastain was hired to work for OpenSea as a product manager, where he was responsible for selecting NFTs to be featured on OpenSea’s website

The DOJ alleged that Chastain used OpenSea’s confidential information between June 2021 and September 2021 to secretly buy “dozens of NFTs” just before they were featured on the website and quickly sell them “at a profit of two to five times”.