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Nathaniel Chastain, 31, of Manhattan, was accused of secretly
buying 45 NFTs on 11 separate occasions based on confidential
information that the tokens, or others by the same creator,
would soon be featured on OpenSea's home page.
Prosecutors said Chastain chose which NFTs to feature, and sold
his NFTs shortly after they were featured, typically for two to
five times what he paid.
In one instance, Chastain allegedly more than quadrupled his
money by purchasing the NFT "Spectrum of a Ramenfication Theory"
on Sept. 14, 2021, and selling it early the next morning.
Prosecutors said the scheme ran from June to September 2021,
with Chastain transacting through anonymous digital currency
wallets and accounts at OpenSea, also known as Ozone Networks
Inc.
"NFTs might be new, but this type of criminal scheme is not,"
U.S. Attorney Damian Williams in Manhattan said in a statement.
"Today's charges demonstrate the commitment of this office to
stamping out insider trading - whether it occurs on the stock
market or the blockchain."
Chastain pleaded not guilty on Wednesday to wire fraud and money
laundering charges, each carrying a maximum 20-year prison term,
before U.S. Magistrate Judge Barbara Moses in Manhattan. Bond
was set at $100,000.
"When all the facts are known, we are confident he will be
exonerated," Chastain's lawyer David Miller said in an email.
Non-fungible tokens are unique digital assets, reflecting
ownership of files such as artwork, other images, videos and
text, and recorded on a blockchain.
The NFT market totaled about $40 billion in 2021, and more than
$37 billion from January to April 2022 though transaction
activity has been stabilizing, according to the blockchain data
firm Chainalysis Inc.
"When we learned of Nate's behavior, we initiated an
investigation and ultimately asked him to leave the company,"
OpenSea said in a statement about Chastain. "His behavior was in
violation of our employee policies and in direct conflict with
our core values and principles."
(Reporting by Jonathan Stempel in New York; Additional reporting
by Luc Cohen in New York; Editing by Richard Chang, Bernard Orr)
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