Former OpenSea Employee Charged With NFT Insider Trading; Faces Wire Fraud & Money Laundering Charges

1 June 2022, 21:30 GMT+0000
Updated by Levy Prata
27 July 2022, 19:22 GMT+0000
In Brief
  • Former New York-based OpenSea employee indicted on charges of money laundering and wire fraud.
  • It is alleged that the employee Nate Chastain used foreknowledge of OpenSea's listing to rake in huge profits.
  • Chastain could face up to 20 years on each charge.
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Former OpenSea employee Nathaniel Chastain, 31, has been formally charged with one count of wire fraud and one count of money laundering and is awaiting trial in New York.

Following an elaborate scheme to rake in large profits from NFTs using insider information, former OpenSea Employee Nate Chastain could face up to 40 years in prison. In an indictment unsealed today by the United States Attorney for the Southern District of New York and a senior New York-based Federal Bureau of Investigation official, Chastain is accused of profiting from insider knowledge on which NFTs would appear on OpenSea’s home page by buying the NFTs and reselling them for substantially more than they were initially listed for.

From approximately June 2021 to September 2021, Chastain allegedly exploited a phenomenon where buyers were willing to pay a premium for NFTs displayed on OpenSea’s home page and for NFTs by the same artist whose work appeared on the homepage. Having foreknowledge of which NFTS would be featured on the home page, Chastain purchased the NFTs. Later, when they appeared on the home page, he sold them for up to five times their original listed price. Damian Williams, the U.S. Attorney, 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.”

Chastain used anonymous crypto wallets

Chastain used anonymous crypto wallets and accounts on OpenSea to evade detection, first highlighted by Twitter user Zuwu. “Hey @opensea why does it appear @natechastain has a few secret wallets that appear to buy your front-page drops before they are listed, then sells them shortly after the front-page-hype spike for profits, and then tumbles them back to his main wallet with his punk on it?” they tweeted.

OpenSea responded by saying that it would conduct “an immediate and thorough review of the incident,” later confirming that the incident was under review by a third party. The company then amended policies to prohibit employees from buying or selling from collections actively featured on the marketplace.

A job well done

Williams lauded the FBI for their work, thanking the National Cryptocurrency Enforcement Team for their help in the investigation. The Assistant Director-in-Charge of the FBI’s New York Field Office said, “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. The FBI will continue to aggressively pursue actors who choose to manipulate the market In this way.”

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Disclaimer

BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.