OpenSea NFT Exec Jailed as Crypto Insider-Trading Laws Evolve

23 Aug 2023 by Rory Kejzerko 2 min read

Almost two years after suspicions were first raised, former OpenSea NFT Product Manager Nathaniel Chastain has been sentenced to three months in jail due to crypto-related insider-trading.

The case began back in September 2021, when crypto sleuths uncovered that the rogue trader had been meddling with trades involving NFTs featured on the OpenSea homepage. Further, things came crashing down for Chastain when the suspicious funds were transferred to a wallet containing his personally owned CryptoPunk.

Source: https://twitter.com/natechastain

Come May 2023- and after having a motion to dismiss the case denied- Chastain finally met his fate when a New York jury found him guilty of wire fraud and money laundering.

With regards to the intricacies of the case, Chastain was found to have leveraged his knowledge of confidential information, as well as his power to choose what NFT collections were featured on the OpenSea homepage, to make profit-fuelled insider trades.

In turn, Chastain was found guilty of buying dozens of NFTs before they were highlighted on the platform, which he then sold for as much as five times what he originally paid.

Chastain was thought to have made more that $57,000 in doing so, which is why in addition to his three months in jail, he’s also been ordered to forfeit 15.98 Ethereum (worth around $26,000) and pay a $50,000 fine.

Insider-Trading’s New Crypto Focus

The case - which is said to be the first to involve digital assets in insider-trading- marks a new era for insider-trading law.

For context, insider-trading law usually relates to security fraud charges for trading shares based on non-public information, however in the case of Chastain, its scope was broadened to include wire fraud and misappropriating confidential business information.

With new interpretations on display, hundreds of lawyers had actually rushed to Chastain’s defence, arguing that the new ruling would ‘distort insider-trading law’. Such efforts were of course done in vain, as the gavel of US District Judge Jesse M. Furman has now been struck, and Chastain will now spend 3 months behind bars.

Or will he? In reaction to the ruling, Chastain pleaded for probation, with his lawyers arguing that the case’s media coverage had already ‘sent the message that prosecutors are cracking down’.

Nonetheless, the case has undeniably put forward a refreshing stance regarding crypto and NFT regulations, which is an area of law that’s being spearheaded by Manhattan US Attorney Damian Williams.

Source: https://www.wsj.com/articles/damian-williams-first-black-manhattan-u-s-attorney-takes-over-after-turbulent-period-11633953600

Since using a similar approach to charge a former Coinbase manager for trading on confidential information, Williams is pushing for crypto fraud to become a top priority for those at Wall Street’s summit.

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