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Nathaniel Chastain, a former product manager at OpenSea, was charged with one count of wire fraud and one count of money laundering related to the purchase and sale of non-fungible tokens (NFTs), prosecutors with the US Attorney’s Office for the Southern District of New York said in a statement. The charges stem from an apparent scheme to allegedly commit insider trading “by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain,” the statement added.
“NFTs might be new, but this type of criminal scheme is not,” said Damian Williams, the US Attorney for the Southern District of New York.
Chastain, 31, was responsible for selecting NFTs to be featured on OpenSea’s homepage as part of his job, the prosecutors said. The price buyers were willing to pay for an NFT, or ones made by the same creator, typically increased substantially after they appeared on OpenSea’s homepage.
NFTs are digital artworks or collectibles that use blockchain technology to prove ownership and individuality. While NFTs have exploded in popularity in recent years, their mainstream emergence has also been plagued by a number of controversies.
Chastain allegedly used OpenSea’s confidential business information to secretly purchase dozens of NFTs shortly before they were featured. He then allegedly sold them at profits of “two- to five-times his initial purchase price,” the authorities stated, and used anonymous digital currency wallets and anonymous accounts on OpenSea to “conceal the fraud.”
Chastain was arrested in New York on Wednesday morning, the statement added. He did not immediately respond to CNN Business’ emailed request for comment. OpenSea told CNN Business in a statement that it launched an investigation and ultimately asked Chastain to leave the company. “His behavior was in violation of our employee policies and in direct conflict with our core values and principles,” the company added.
“As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself,” Williams said and added that the charges demonstrate his office’s commitment to “stamping out insider trading — whether it occurs on the stock market or the blockchain.”