The Department of Justice pursued an NFT-related insider trading charge for the first time ever.
Nate Chastain, an ex-product manager at OpenSea, was charged with wire fraud and money laundering in relation to insider trades of NFT collections on the popular NFT marketplace.
According to the Department of Justice, Chastain exploited the vulnerabilities of the fledgling NFT market for his own gain. Michael J. Driscoll, FBI assistant director-in-charge, said:
“The FBI will continue to aggressively pursue actors who choose to manipulate the market in any way.”
Chastain purchased dozens of NFTs between June 2021 and September 2021 before they were featured on OpenSea. Since he, as product manager, had discretion over which collections would launch on the platform, Chastain was in an ideal position to exploit his unfair information advantage. Chastain is alleged to have sold the NFT collection for 2X to 5X gains via different crypto wallets.
"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."
Chastain's new project called Oval, a self-styled "social commerce platform designed by talent from Instagram and OpenSea," will likely be off to a more difficult start now.
Insider trading in the crypto industry is not a new problem either. In April, Coinbase CEO Brian Armstrong outlined new policies at his company to prevent possible insider trading at Coinbase. He reacted to accusations of a similar scheme of insider trading happening at Coinbase.