Nathaniel Chastain has been indicted by the DOJ in the “first-ever digital asset insider trading scheme.”

Chastain, a former product manager at OpenSea, the largest NFT marketplace, has been arrested by the DOJ for insider trading of NFTs. He selected, and had privileged information on what NFTs would be featured on OpenSea’s home page; he used it to purchase those NFTs in advance using anonymous digital currency wallets and accounts on OpenSea. After the NFTs featured on OpenSea, Chastain resold those NFTs at profits of 2x to 5x of his initial investment. (US DOJ)

Chastain conducted this operation between June 2021 and September 2021.

He is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison. However, the final sentencing will determined by a judge.

“With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain,” said FBI Assistant Director-in-Charge Michael J. Driscoll. “The FBI will continue to aggressively pursue actors who choose to manipulate the market in this way.”

U.S. Attorney Damian Williams said: “NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself. Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”

Anonymous Twitter leak; OpenSea confirms

In September, an anonymous tweet busted open Chastain’s modus operandi, prompting a confirmation from OpenSea that an employee was indeed purchasing items that they knew were set to display on the front page before they appeared there publicly:

“We are taking this very seriously and are conducting an immediate and thorough review of this incident so that we have a full understanding of the facts and additional steps we need to take,” the NFT marketplace said.

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