The FBI arrested Nate Chastain, the former head of product at OpenSea, for his insider trading. The decision comes 8 months after the massive marketplace acknowledged Chastain’s illegal actions. The former employee faces up to 20 years in prison. In fact, this is the first time the FBI has engaged in an insider trading scheme related to NFT.
Why did the FBI arrest Nate Chastain?
On June 1, the New York Department of Justice upheld its conviction of Nate Chastain in the OpenSea case. Accordingly, the FBI accuses the former employee of money laundering and wire fraud.
The decision comes approximately 8 months after OpenSea discovered Chastain’s insider trading system.
“NFTs may be new, but this type of criminal system is not.” said US Attorney Damian Williams. “As claimed, Nathaniel Chastain betrayed OpenSea by using his confidential business information to make money for himself. Today’s indictments demonstrate the agency’s commitment to eradicating insider trading — whether it takes place on the exchange or on the blockchain.”
This is the first time the FBI has charged an employee of an NFT-related insider trading scheme. Based on the allegations, Nate Chastain could face up to 20 years in prison for each of his charges.
How did Chastain’s opensea insider trading system work?
Basically, the former Head of Product used his position of power to find out which NFTs would appear on the OpenSea homepage. Chastain then purchased dozens of NFTs from the collections to be featured on the home page.
It was a smart move considering the reserve price of the NFT collections will go up drastically once they are launched. As soon as an NFT came up on the homepage, Nate Chastain started selling his own collectibles as well.
In fact, he sold many digital assets at five times their original price. Therefore, the employee made a profit of over 19 ETH within a few months.
What’s next for OpenSea?
Specifically, Nate Chastain’s insider trading system fees do not affect OpenSea in any way. The marketplace will continue to function as usual.
However, the FBI’s involvement in an NFT marketplace is surprisingly significant. Basically, their action reflects the Bureau’s attention to the Web3 world. FBI Assistant Director Michael J. Driscoll even confirmed the matter:
“With the emergence of new investment vehicles such as blockchain-backed non-fungible tokens, there are those who will exploit vulnerabilities for their own benefit. The FBI will continue to aggressively pursue those who manipulate the market in this way.” he said in a statement.
All in all, the former employee was brought before the United States District Court of New York Southern District. Nate Chastain has deleted almost all of his Twitter posts despite his bio saying “formerly OpenSea”. Although he resigned shortly after the insider trading was exposed, Chastain faces a possible 20-year prison sentence. In the meantime, the OpenSea marketplace will continue to function as usual.
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