Insider trading is considered one of the biggest and punishable evils when trading on financial markets.
Sooner or later, we should have heard that someone has taken advantage of insider information in the NFT sphere as well. And this someone showed up. It turned out to be one of the former product managers of the leading NFT supermarket in the world – OpenSea. Nathaniel Chastain was the one who determined which tokens would be featured on the front page of OpenSea. Of course, getting into the TOP of a particular NFT with any objective value gave an advantage. Chastain used it by investing in these items.
The very fact of “being the first to buy” would probably be relatively innocuous (although not). But Chastain used additional anonymous accounts in his criminal scheme, through which he “resold” NFT to himself several times, thereby artificially heating demand and stimulating the growth in the value of tokens.
Blockchain’s anonymity is a very overrated concept. All transactions are forever recorded in a public register so that you can trace the activity of any address and the history of its interactions with other entities. Therefore, in September 2021, users, OpenSea employees, and government regulators became interested in Nate’s ingenious sagacity and flair.
A post from Devin Finzer appeared on the OpenSea blog, in which he not only condemned such actions but also announced the introduction of new rules and prohibitions for all members of the marketplace team. However, no specific names were mentioned due to political correctness.
The prosecutor conducting the investigation was categorical, aptly noting that “perhaps NFTs are something new for us, but the type of this criminal scheme is not.” Thus, Chastain was directly accused of insider trading, which in the US system is punishable by up to 20 years in prison.
It follows from the indictment that the former director of OpenSea acquired and sold 45 NFTs in this way. He was arrested on June 1, 2022, and will appear before the District Court of New York. Now he faces confiscation and long-term imprisonment.
