Nathaniel Chastain, a former product manager at OpenSea, has received a three-month prison sentence for exploiting his role to gain insights into upcoming non-fungible token (NFT) promotions, which he used for his own financial benefit.
“Today’s sentence should serve as a warning to other corporate insiders that insider trading – in any marketplace – will not be tolerated,” US prosecutors declare.
Additional Constraints Imposed On Chastain Following Prison Term
According to a statement from the US Attorney’s Office on Aug. 22, Chastain’s case marks the first-ever insider trading case involving digital assets.
It states that Chastain will be under additional conditions following his three month sentence:
“In addition to the prison term, CHASTAIN, 31 […] was sentenced to three months of home confinement, three years of supervised release, a $50,000 fine, and ordered to forfeiture the Ethereum he made trading the featured NFTs.”
US prosecutors claimed that between June and September 2021, Chastain exploited his access to OpenSea’s internal systems. He used information regarding which NFT’s will be appearing on OpenSea’s homepage. Chastain then “secretly purchase dozens of NFTs shortly before they were featured.”
Earlier reports reveal that Chastain earned more than $50,000 in illicit profit from the scheme. In a May court hearing, Prosecutor Thomas Burnett highlighted Chastain’s wrongful intent. “He abused his status at OpenSea to line his own pockets, and he lied to cover his tracks,” Burnett stated.
In September 2021, Chastain’s strategy came to light through the observations of Twitter user Zuwu. Zuwu asked OpenSea in a tweet why it appears that Chastain “has a few secret wallets that appear to buy your front page drops before they are listed, then sells them shortly after the front-page-hype spikes for profits.”
To learn more about NFTs, read BeInCrypto’s guide: NFTS Explained: What Are Non-fungible Tokens and How Do They Work?
Chastain’s Allegations Leads To OpenSea Changing Employees Policies
Not long after, OpenSea issued an official statement acknowledging that Chastain had used confidential information to profit from NFT sales.
OpenSea announced a new set of policies following Chastain’s allegations.
It specified that during periods of active promotion by OpenSea, employees were not to engage in buying or selling from collectors or creators. Additionally, team members were informed that using “insider information” for trading NFTs was not allowed.
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