Hacking and Ponzi scams have been reported in crypto world with alarming frequency. Now, for the first time, another serious crime of insider trading in NFT exchange Opensea has been reported.
The Federal Bureau of Investigation (FBI) has arrested one Nathaniel Chastain who has been “charged with committing wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens, or “NFTs,” by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.”
An NFT is a form of an art which can be presented digitally and recorded on a blockchain and assessed in terms of cryptocurrency. The world now considers it as a value holding investment in collectibles.
Chastain, a former product manager at Ozone Networks, Inc. popularly known as Opensea which claims to be world’s first and largest NFT marketplace. He being at a position at Opensea having access to confidential information of would be listing of NFTs for sale which he allegedly used for his own personal gain in a fraudulent manner.
Chastain was responsible for selecting NFTs to be listed on Opensea exchange platform. Thus, he had information of NFTs with him before their listing on homepage of Opensea digital platform for general public to buy. After listing on platform, generally there was substantial increase in the price of NFTs. Chastain allegedly used that information of would-be listed NFTs to secretly purchase them and sell them after increase in prices and made profit 3-5 times the prices of initial purchase.
As per Department of Justice, 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.”
Chastain faces a maximum punishment of 20 years in prison, if charges of fraud and money laundering are proved against him. Till then law presumes him innocent until proven guilty.
