The United States Department of Justice has charged a former executive of OpenSea, the world’s most widely used NFT exchange, with insider trading. This offense consists of the use of knowledge and confidential information in order to manipulate a market. This is the first recognized case of its kind in the world of non-fungible tokens.
Insider Trading and NFT
As a former product manager for OpenSea, Nathaniel Chastain was well aware that collections of NFTs placed on the site’s homepage saw their value increase significantly. He also knew in advance which series of non-fungible tokens would benefit from this privilege. Between June and September 2021, armed with this information, he obtained NFTs before they were put forward, and therefore increased in value, in order to resell them later at two to five times more expensive than their initial prices. .
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New York District Attorney Damian Williams has declared that ” NFTs may be new, but this type of criminal system is not. Nathaniel Chastain betrayed OpenSea by using confidential business information he possessed to enrich himself. Today’s charges demonstrate our commitment to eradicating insider trading, whether committed on the stock exchange or on the blockchain “.
He faces up to 40 years in prison for money laundering and wire fraud.
Trust at the heart of the debates
The former employee’s suspicious activities were discovered last September. Several Twitter users have been investigating questionable moves within the Ethereum blockchain. Chastain used multiple anonymous accounts as well as several crypto wallets to cover his activities.
Upon learning of the charges, OpenSea immediately fired Nathaniel Chastain. A spokesperson for the platform reminds TechCrunch ” that as the leading NFT marketplace for the web3, trust and integrity are at the heart of our business. His behavior was a violation of our people policy and in direct conflict with our core values and principles “.
In the world of cryptocurrencies, trust is essential. Transactions operating in the blockchain are verified by users, which eliminates the need for an intermediary unlike fiat currencies. Since then, OpenSea has implemented new rules for its employees to prevent this kind of behavior.