Crazy Inside Scheme: Ex-Head of OpenSea Charged with NFT Fraud & Money Laundering

Investors were shook yesterday when the news broke that Nathaniel Chastain, the former head of product at OpenSea was charged with money laundering and wire fraud involving digital asset trading. This could be a major landmark case, as the U.S. Department of Justice noted that this is the first insider trading-related case involving digital assets.

Ex-Product Manager Guilty of Insider Trading on NFTs

Chastain was accused of profiting illegally off of his involvement with OpenSea by utilizing his insider knowledge of which assets would be featured on the homepage of the platform. Reports allege that the ex-product manager would purchase the NFTs he had chosen to be featured on the OpenSea platform, and then resell them shortly afterwards for a profit of more than $50,000.

Chastain’s fall from grace occurred in September of 2021, when allegations of his illicit activity began to surface on social media. After attempting and failing to get the case dismissed prior to trial, Chastain went to court in Manhattan on April 24, where a jury reached a guilty verdict for both counts.

Insider Trading Laws Applied to Digital Assets: Chastain Case Precedent Setting Implications

An interesting aspect of the case is that Chastain’s defense attorneys, which numbered over 300, argued that the confidential business information held by OpenSea was not considered property, and that the company didn’t deem the data as valuable to them. The attorneys further argued that employees were not prohibited from trading featured NFTs before Chastain’s last day. This case has the potential to set a precedent and expand the scope of how insider trading laws are applied to a variety of asset classes.

Philip Moustakis, a former Securities and Exchange Commission enforcement lawyer, noted that this case could have much larger implications for digital assets that don’t fit into the existing regulation preventing investment advisors, brokers, and others from trading on non-public information. In a similar case, another former Coinbase product manager, Ishan Wahi, pleaded guilty to wire fraud and money laundering counts earlier in the year, after he was accused of insider trading on cryptocurrencies prior to Coinbase listing.

Crypto & NFT Crimes: The First Domino?

It will be interesting to see what the future holds for cryptocurrency and NFT related crimes as this case unfolds and is brought to justice. This conviction could be the first domino to fall, setting the stage for critical regulation and investigations into the world of digital assets.

We will be closely monitoring Chastain’s case, and others like it, to ensure the utmost transparency and accountability in this space. Whether you followed this case closely or not, it’s a good reminder to do your own research and remember that all crypto or NFT purchases come with inherent risks.

Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

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Rina Giannino
Journalist venturing into blockchain, Rina has been a follower of the technology since 2019 and finally taken the plunge with a career as a journalist in the industry.