Former OpenSea Employee Made ‘Free Money’ Off NFTs, Says US Prosecutor

A former employee of OpenSea, the world’s largest marketplace for non-fungible tokens (NFTs), used inside knowledge of which assets would be featured on its homepage to make “free money,” a prosecutor said on Monday as an insider trading trial wound to a close.

The charges against Nathaniel Chastain, a former OpenSea product manager, were the first in a series of high-profile cases related to digital assets launched by the US Attorney’s office in Manhattan last year. Prosecutors have called it the first criminal insider trading case involving such assets.

Prosecutor Thomas Burnett said in his closing argument that Chastain chose which NFTs to feature, and then profited illegally by selling his tokens shortly thereafter. He made upwards of $50,000 (nearly Rs. 40 lakh) off such trades before getting caught in September 2021, Burnett said.

“He was using OpenSea’s information like his own piggy bank,” Burnett told the jury. “It was as good as free money.”

Chastain’s lawyers were expected to give their closing argument later on Monday. They have said that his actions were not insider trading, and that the information he accessed was not OpenSea’s property and had no inherent value to the company.

Chastain’s lawyers have also said OpenSea did not start banning employees from buying or selling featured collections or creators until Chastain’s last day, in September 2021. The company did not treat such information as confidential while Chastain worked there, his lawyer David Miller has argued.

Chastain faces one count of wire fraud and one count of money laundering. His trial before US District Judge Jesse Furman in Manhattan began last week.

The case could have broader implications for assets that do not fit into existing regulations preventing investment advisers, brokers and others from trading on material nonpublic information, legal experts have said.

© Thomson Reuters 2023