Ex OpenSea Manager Arrested for Insider Trading, Accused of Buying NFTs That Were Going to Be Featured on the Homepage

The US attorney's office for Manhattan has charged a former product manager at OpenSea, the largest marketplace for NFTs or non-fungible tokens, with insider trading of a digital asset, a first for the Department of Justice.

Nate Chastain was arrested by the FBI early Wednesday morning in New York City and charged with wire fraud and money laundering in connection with an elaborate NFT insider trading scheme.

Chastain Purchased NFTs Knowing That They were Going to be Featured

Nathaniel Chastain
Nathaniel Chastain (left) and image showing NFTs featured on the OpenSea marketplace. OpenSea

On multiple occasions in 2021, Nathaniel Chastain allegedly secretly purchased NFTs before they were featured on OpenSea's homepage, only to resell them after the assets were placed on the front page, increasing their value dramatically, according to the indictment from the Southern District of New York, unsealed Wednesday.

One of Chastain's responsibilities at the marketplace was to determine which NFTs would be featured, thus allowing him to allegedly exploit the system in order to make a profit.

"NFTs might be new, but this type of criminal scheme is not," said Damian Williams, US attorney for the Southern District of New York. "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 Dummy Accounts to Make the Purchases

The alleged incidents of insider trading took place between May and September 2021. Chastain knew which NFTs would be appearing on the front page of OpenSea, and before they were featured, it's alleged, he would buy them using dummy accounts he created. He would then sell them hours or days after, making double, triple or more than quadruple what he paid for them, the indictment said.

A charge of insider trading carries a maximum sentence of 20 years in prison. Chastain also was charged with money laundering for the transactions involving the NFTs, and that crime also carries a 20-year maximum sentence.