A world first: Former OpenSea employee charged with fraud and money laundering for NFT insider trading

According to information disclosed on the official website of the U.S. Department of Justice (DOJ) on June 1, the DOJ filed NFT insider trading charges against a former OpenSea employee.

The accused employee, Nathaniel Chastain, was arrested on the morning of June 1 and charged with wire fraud and money laundering, each of which carries a maximum sentence of 20 years in prison.

Chastain is a former product manager at OpenSea, responsible for screening NFTs that appear on the homepage of the website. Before that, OpenSea would keep these NFTs confidential until they were posted on the homepage. OpenSea is an online trading market for NFTs. As of January 2022, the company's valuation is $13.3 billion and is considered to be the world's largest NFT trading platform.

Knowing in advance which NFTs would appear on the site, Chastain purchased a batch of NFTs that would soon appear on OpenSea’s homepage.

According to the Department of Justice, Chastain used anonymous cryptocurrency wallets and anonymous accounts on OpenSea to purchase these NFTs in order to cover his tracks. It is reported that between June and September 2021, Chastain used confidential information to purchase dozens of NFTs. After the NFTs were listed on the OpenSea homepage, Chastain sold them at two to three times the original purchase price.

But Chastain's whereabouts were eventually exposed, and he has been confirmed to be the legal owner of the anonymous account. OpenSea also stated in a statement that the company was aware of the insider trading.

"As the world's leading web 3 NFTs marketplace, trust and integrity are at the core of everything we do. When we learned of Chastain's behavior, we immediately investigated and ultimately asked him to leave the company. His behavior was a serious violation of our employee policies and in direct conflict with our core values ​​and principles," an OpenSea spokesperson responded.

"NFT trading may be new, but this type of criminal scheme is not new," said U.S. Attorney General Damian Williams. "What happened today demonstrates that we absolutely prohibit insider trading, whether it occurs in the stock market or on the blockchain."