Former OpenSea Executive Nate Chastain Charged with NFT Insider Trading in the US
Nathaniel Chastain, a previous Opensea executive, is in trouble with the U.S. legal system following his NFT insider trading allegation.
He was the Head of Product in the leading NFT marketplace, OpenSea, which gave him access to the Non-Fungible Tokens before the actual launch. However, towards the end of the summer of 2021, a paper trail was noticed and published in a thread that led to further investigation before his eventual resignation.
As of the time of release, Nate has been charged with money laundering and wire fraud with regard to committing insider trading in Non-Fungible Tokens (NFT) by the U.S. Attorney’s Office in the Southern District of New York (SDNY). Each count charge carries a maximum sentence of 20 years in prison.
The U.S. Department of Justice stated in the lawsuit that Nate was supposed to select the NFTs that would be featured on the OpenSea homepage, but he has used the information from June 2021 to September 2021 to purchase the NFTs to be featured and later sold them for two to five times the purchase price. He used to trade and make purchases using anonymous wallets and anonymous accounts for his gain. The U.S. Attorney, Damian Williams, asserted in his press release that
NFTs might be new, but this type of criminal scheme is not. Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain.U.S. Attorney, Damian Williams
Nathaniel Chastain – Can A Fraudster Be Trusted Again?
The 31-year-old was formerly head of product at OpenSea and a senior product manager at the Ethereum wallet MetaMask. He was set to launch an NFT platform that offers an easier discovery system for ‘Personalized NFTs’ called Oval.
This news was released In March, almost five months after his resignation from OpenSea. According to its pitch deck, the new venture Oval was looking to raise a $3 million seed round at a $30 million pre-money valuation. An earlier version of the deck viewed by CoinDesk showed that the project was looking to raise $7.5 million at a $50 million pre-money valuation.
Whether there was any progress in this venture before his prosecution is not verified, but NFT participants were skeptical about his role in the proposed platform. A quick study of Oval’s roadmap shows that it wasn’t pitching to be a competition to OpenSea but instead looked to form a new initiative.
An Excuse For NFT Government Regulations
The Justice Department and SDNY U.S. Attorney’s Office started getting more active in prosecuting crypto crimes, but the NFT space has largely evaded much action, which made the prosecution a bit of an unusual scenario to those in the crypto space.
After the release of the details surrounding the insider scheme by Nate Chastain, the Government made it clear that reports of such nature would not be tolerated, whether in securities or virtual currencies. Attorneys believe Chastain’s arrest signals the beginning of law enforcement actions related to NFTs and Cryptocurrencies.
Max Dilendorf, a New York City-based attorney whose practice is focused on cryptocurrency and NFTs, said the arrest sends a “very, very loud message to the industry” that would enable federal regulators to have a formidable stand-in NFT deals and transactions. OpenSea made a statement about the case, saying,
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.
From all indications, the crypto sector is trying to maintain its integrity in the face of these recent crises.