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Fired OpenSea product manager charged for insider NFT trading

NFTs still baffles many people, but the new tech apparently has no trouble attracting people with less than a pure motive. A former manager at OpenSea has been charged with wire fraud and insider trading related to an insider trading operation.

Nathaniel Chastain, a former product manager at OpenSea, has been charged to court on the allegation of engaging in insider trading. He was accused last September and sacked, but he has now finally been criminally charged.

Chastain’s job at OpenSea involved deciding which NFT collections would get displayed on OpenSea’s front page. This usually helps the collection to increase in value. However, an investigation revealed that Chastain bought 45 tokens on about a dozen different occasions just before the collections appeared on the platform’s homepage. Sometimes, the purchases went through minutes before the collections went live on the prime spot. Chastain would sell the token for between two and five times the purchase price, thereby exploiting his advanced knowledge for his personal gain. All these took place “from at least in or about June 2021 to at least in or about September 2021.”

It is noteworthy that this practice is called insider trading, a term previously associated with stock trading fraud.

Chastain allegedly tried to cover up his tracks by making the purchases using anonymous digital currency wallets and anonymous OpenSea accounts.

The former product manager is required to give up all the funds that can be traced to his insider trading scheme.

Leading the investigation was the FBI’s National Cryptocurrency Enforcement Team, NCET. The Securities Exchange Commission, known for spearheading insider trading investigations, did not appear to have a part. This is even though the SEC has doubled its cryptocurrency enforcement workforce due to the prevalence of fraud in the market.

OpenSea is the largest platform for buying and selling NFTs, giving it an outsized role in the relatively new NFT space. This means more attention is on the marketplace, both from scammers looking to bilk users, and law enforcement. The former often impersonate the company’s employees to steal tokens. OpenSea uses centralized enforcement to recover stolen goods.

With charges of one count of wire fraud and one count of money laundering, Chastain faces up to 20 years in prison on each count. However, he remains innocent until proven guilty.

U.S. Attorney Damian Williams said: “NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself. Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain.”

FBI Assistant Director-in-Charge Michael J. Driscoll said: “In this case, as alleged, Chastain launched an age-old scheme to commit insider trading by using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage. With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain. The FBI will continue to aggressively pursue actors who choose to manipulate the market in this way.”

Written by HackerVibes

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