U.S. prosecutors in Manhattan on Wednesday charged a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, with insider trading, the first such case involving digital assets.
Nathaniel Chastain, 31, of Manhattan, was accused of secretly buying 45 NFTs on 11 separate occasions based on confidential information that the tokens, or others by the same creator, would soon be featured on OpenSea's home page.
Prosecutors said Chastain sold his NFTs at a profit shortly after they were featured, typically two to five times what he paid.
They said that in one instance, Chastain more than quadrupled his money by purchasing the NFT "Spectrum of a Ramenfication Theory" on Sept. 14, 2021, and selling it early the next morning shortly after it was featured.
Prosecutors said the scheme ran from June to September 2021, when Chastain was responsible for selecting which NFTs would be featured, and that he transacted through anonymous digital currency wallets and accounts at OpenSea.
"NFTs might be new, but this type of criminal scheme is not," U.S. Attorney Damian Williams in Manhattan said in a statement. "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 was charged with wire fraud and money laundering, each carrying a maximum 20-year prison term. A lawyer for Chastain could not immediately be identified.
"When we learned of Nate's behavior, we initiated an investigation and ultimately asked him to leave the company," OpenSea said in a statement. "His behavior was in violation of our employee policies and in direct conflict with our core values and principles."
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