First NFT Insider-Trading Trial Results in Guilty Verdict for Ex-Opensea Manager
Former OpenSea product manager Nathaniel Chastain has been found guilty of wire fraud and money laundering in the first insider-trading trial involving non-fungible tokens (NFTs).
A federal court in Manhattan, New York handed down the verdict on Wednesday following a week-long trial and two days of deliberations, Bloomberg reported Thursday.
Chastain was accused of using confidential information to make thousands of dollars in profit by buying NFTs just before their listing on OpenSea's homepage, where their prices would immediately increase.
Once the prices had increased, Chastain would then sell the NFTs at a profit, violating his duty to keep the information confidential.
The government alleged that Chastain made over $57,000 profit from his illicit actions.
Unlike most traditional insider-trading cases, prosecutors charged Chastain with wire fraud, not securities fraud. That was because the US government has not yet ruled whether NFTs are legally classified as a security.
Chastain had previously argued that NFTs aren’t securities or commodities and therefore aren’t subject to the government’s theory. He also contended that he didn’t commit money laundering because the transactions were made on a public blockchain.
A group of more than 300 defense attorneys filed a letter in support of Chastain’s request to throw out the indictment, saying that a finding that confidential business information is property would expand how fraud is prosecuted and and “criminalize a broad swath of conduct.”
However, US prosecutors fought back, noting that he used confidential information for personal financial gain.
“Although this case involved trades in novel crypto assets, there was nothing particularly innovative about his conduct — it
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