Former OpenSea employee Nate Chastain has been indicted on one count each of wire fraud and money laundering, after he allegedly used his position to engage in insider trading, according to documents on file with the U.S. Attorney's Office in the Southern District of New York.
Chastain, who was arrested June 1, faces up to a maximum of up to 20 years in prison for each count.
According to the indictment, Chastain, who was responsible for choosing which NFT collections were featured on the home page of OpenSea, allegedly purchased 45 NFTs on 11 different occasions that were featured. From June to September of 2021, the indictment says, he allegedly used anonymous wallets to perform the trades and protect his identity and later sold the NFTs for 2-5 times the purchase price.
After his alleged actions were reported in September, OpenSea "requested and accepted" Chastain's recommendation from his position and created new expectations and processes regarding employees and their access to data and information.
"Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain," said Damian Williams, U.S. Attorney for the Southern District of New York.
Though Chastain was charged with wire fraud and money laundering, insider trading is a common complaint in an industry where prices can rise and fall indiscriminately at times. Back in December, some wallets allegedly front-ran the purchase of Clone X Mint Vials before RTFKT's announcement that it was being acquired by Nike.
Concerns about this case becoming a precedent for NFTs being subject to securities law were quashed by legal experts, including Adam Sternbach, general counsel for Fractional.
Insider trading can be a securities-related criminal charge or a descriptor for a scheme whereby someone trades on material non-public information in non-securities assets.— Adam Sternbach (@adamsternbach) June 1, 2022
Nate’s case is the second example. Don’t confuse this indictment with a conclusion NFTs are securities.