The Department of Justice has charged Nathaniel Chastain, a former product manager at the NFT marketplace OpenSea, with criminal insider trading, the government said Wednesday.
NFTs, or non-fungible tokens, are a type of cryptocurrency asset that typically confers ownership of digital files like artwork on a particular blockchain, though this ownership is not usually endorsed by the legal system.
OpenSea is a marketplace where users can buy and sell NFTs on the Ethereum ETHUSD, -6.56% blockchain.
“NFTs might be new, but this type of criminal scheme is not,” said U.S. Attorney Damian Williams in a statement. “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.”
The DOJ alleges that Chastain used his knowledge of which NFTs were to appear on the OpenSea homepage to buy those tokens and then sell them for a higher price once interest was driven by its placement on the popular marketplace.
Chastain is being charged with one count of wire fraud and one count of money laundering, with each carrying a maximum sentence of 20 years in prison.
Chastain was asked to resign after OpenSea became aware of his behavior, according to a report in CoinDesk.
“Yesterday we learned that one of our employees purchased items that they knew were set to display on our front page before they appeared there publicly,” OpenSea CEO Devin Finzer said in a September 2021 blog post. “This is incredibly disappointing. We want to be clear that this behavior does not represent our values as a team.”