Trial of former OpenSea manager begins in first NFT insider trading case

Trial of former OpenSea manager begins in first NFT insider trading case

This week, US authorities will go up against a former worker of OpenSea, the largest non-fungible token (NFT) market in the world, who they suspect of insider trading.

The Manhattan U.S. Attorney’s office announced a slew of high-profile cases involving digital assets last year, and the accusations against Nathaniel Chastain, a former product manager for OpenSea, were the first in that series. It’s thought to be the first instance of criminal insider trading involving such assets.

According to the prosecution, Chastain covertly purchased dozens of NFTs after learning that they—or tokens from the same creators—would shortly be highlighted on OpenSea’s home page.

They said that Chastain selected which NFTs to highlight and then quickly sold his tokens to make money unlawfully.

According to prosecutors, “He abused that position of trust,” in a filing on April 4.

One count of wire fraud and one count of money laundering are brought against the defendant. It is anticipated that his trial will run one to two weeks before Manhattan U.S. District Judge Jesse Furman.

The information Chastain viewed was not OpenSea’s property and had no intrinsic worth to the company, according to his attorneys, who also contend that his actions did not constitute insider trading.

At a pretrial hearing on Thursday, Chastain’s attorney David Miller stated, “We are not talking about securities trading.

He continued, “There is a substantial danger of undue prejudice and confusion of the jury” if the prosecution brings up insider trading.

Additionally, according to Chastain’s attorneys, OpenSea did not start prohibiting staff members from purchasing or selling featured collections or creators until after Chastain’s departure, in September 2021.

The organization’s new regulations “tend to show that OpenSea did not consider – or treat – the relevant information to be confidential” when Chastain worked there, Miller claimed in a filing on April 17.

According to Philip Moustakis, a former SEC enforcement attorney and partner at Seward & Kissel LLP, the case may have wider consequences for assets that do not fall within the current laws prohibiting investment advisers, brokers, and other parties from trading on substantial nonpublic information.

Is there any insider trading going on here? stated Moustakis. There is precedent that insider trading theory can be applied to any asset class if this case is upheld.


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