OpenSea’s Ex-Head of Product Indicted Related To NFT Insider Trading

Nathaniel Chastain, the former head of product at NFT platform OpenSea, allegedly bought NFTs soon before the company planned to feature them on its homepage.

A former senior employee at the internet’s largest NFT trading platform has been arrested and named in the government’s first case alleging insider trading of digital assets, the Justice Department said Wednesday.

According to a press release from the United States Department of Justice, Chastain was arrested this morning in New York, and will be presented today in the United States District Court for the Southern District of New York.

Chastain was accused of using secret Ethereum wallets to purchase NFTs based on confidential information that they’d soon be featured on OpenSea’s home page. He was allegedly responsible for selecting which NFTs would be featured on the homepage, according to the indictment.

Charging documents allege that Chastain laundered at least 45 NFTs in 2021, each time selling them for two to five times what he had just paid for them.

The actions were compared to frontrunning and insider trading, activities in which an individual profits off of non-public information. Those activities are prohibited in traditional financial markets, but it was unclear how those laws might apply to the NFT space. Law enforcement indicates that those laws will apply just the same.

U.S. Attorney Damian Williams commented in a statement:

“NFTs might be new, but this type of criminal scheme is not. 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.”

FBI Assistant Director-in-Charge Michael J. Driscoll said the FBI “will continue to aggressively pursue actors who choose to manipulate the market in this way.”

OpenSea published a blog post in September of last year acknowledging Chastain’s actions. In response to today’s arrest, an OpenSea spokesperson commented:

“As the world’s leading web3 marketplace for NFTs, trust and integrity are core to everything we do. When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company. His behavior was in violation of our employee policies and in direct conflict with our core values and principles.”