Former OpenSea employee faces insider trading charges in high-profile crypto case

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24th April 2023 – (New York) Nathaniel Chastain, a former product manager at OpenSea, the world’s largest marketplace for non-fungible tokens (NFTs), is facing insider trading charges in a high-profile case brought by U.S. prosecutors. The charges against Chastain are the first in a series of high-profile cases related to digital assets launched by the Manhattan U.S. Attorney’s office last year, and the first criminal insider trading case involving such assets.

Prosecutors allege that Chastain secretly bought dozens of NFTs based on confidential information that the tokens, or others from the same creators, would soon be featured on OpenSea’s home page. In his role as product manager, Chastain had the power to choose which NFTs to feature, and then profited illegally by selling his tokens shortly thereafter.

Chastain faces one count of wire fraud and one count of money laundering. His trial before U.S. District Judge Jesse Furman in Manhattan is expected to last one to two weeks.

Chastain’s lawyers have argued that his actions were not insider trading, and that the information he accessed was not OpenSea’s property and had no inherent value to the company. They also pointed out that OpenSea did not start banning employees from buying or selling featured collections or creators until Chastain’s last day in September 2021, suggesting that the company did not consider the relevant information to be confidential while Chastain worked there.

The case could have broader implications for assets that do not fit into existing regulations preventing investment advisers, brokers, and others from trading on material nonpublic information, said Philip Moustakis, a former SEC enforcement lawyer and partner at Seward & Kissel LLP.