Former OpenSea product supervisor Nathaniel Chastain has been discovered responsible of wire fraud and cash laundering within the first insider-trading trial involving non-fungible tokens (NFTs).
A federal courtroom in Manhattan, New York handed down the decision on Wednesday following a week-long trial and two days of deliberations, Bloomberg reported Thursday.
Chastain was accused of utilizing confidential data to make hundreds of {dollars} in revenue by shopping for NFTs simply earlier than their itemizing on OpenSea’s homepage, the place their costs would instantly enhance.
As soon as the costs had elevated, Chastain would then promote the NFTs at a revenue, violating his responsibility to maintain the data confidential.
The federal government alleged that Chastain remodeled $57,000 in revenue from his illicit actions.
In contrast to most conventional insider buying and selling circumstances, prosecutors charged Chastain with wire fraud, not securities fraud. That was as a result of the US authorities has not but dominated whether or not NFTs are legally labeled as a safety.
Chastain had beforehand argued that NFTs aren’t securities or commodities and due to this fact aren’t topic to the federal government’s idea. He additionally contended that he didn’t commit cash laundering as a result of the transactions had been made on a public blockchain.
A gaggle of greater than 300 protection attorneys filed a letter in help of Chastain’s request to throw out the indictment, saying {that a} discovering that confidential enterprise data is property would increase how fraud is prosecuted and “criminalize a broad swath of conduct.”
Nonetheless, US prosecutors fought again, noting that he used confidential data for private monetary achieve.
“Though this case concerned trades in novel crypto belongings, there was nothing notably progressive about his conduct — it was fraud,” Manhattan US Attorney Damian Williams said.
Chastain Faces Up to 20 Years in Prison
Chastain faces up to 20 years in prison on both counts of wire fraud and money laundering, although his sentence could be lessened.
US District Judge Jesse Furman, who presided over the trial, set Chastain’s sentencing date for August 22.
“We respect the jury process,” said David Miller, one of Chastain’s lawyers. “We respectfully disagree with their decision and will evaluate our options.”
As reported, an anonymous thread on Twitter in September 2021 first revealed that Chastain might be using insider information to purchase NFTs.
Subsequently, OpenSea confirmed that they learned one of their employees purchased items using confidential information without disclosing that it was Chastain.
He was arrested in June last year.
Chastain was hired to work for OpenSea as its product manager, where he was responsible for selecting NFTs that would be featured on OpenSea’s homepage.
The DOJ claimed that Chastain used OpenSea’s confidential information between June 2021 and September 2021 to secretly purchase “dozens of NFTs” just before they were featured on the homepage and swiftly sell them “at earnings of two- to 5 instances.”
