It is the first time a person has been convicted for trading NFTs using privileged knowledge.
Nathaniel Chastain, the former product manager at OpenSea, has been convicted of wire fraud and money laundering on May 3rd in a New York federal court.
In June 2022, the man was accused of non-fungible token (NFT) insider trading on the NFT marketplace OpenSea.
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A former OpenSea manager was responsible for selecting digital collectibles to be featured on the platform's non-fungible token marketplace. Prosecutors claimed that Chastain would often buy these NFTs and resell them after they were featured, leading to him being charged with wire fraud and money laundering on June 1st.
The trial, which began on April 24th, has been closely followed by attorneys specializing in cryptocurrency-related matters, with legal experts claiming that the case's outcome could determine whether NFTs are classified as securities.
Defense attorney Daniel Filor argued during closing statements that Chastain was not guilty, as he had never been informed that the information was meant to be confidential, stating:
Nobody told Nate that he couldn't use or share that information.
On the other hand, prosecutor Allison Nichols contended that Chastain knew he was breaking the law, as he utilized anonymous OpenSea accounts for the trades, suggesting he feared getting caught. Nichols reportedly told the jury:
He hid what he was doing. He knew that he had violated OpenSea's confidentiality agreement.
In a separate case, former Coinbase employee Ishan Wahi and his brother Nikhil were charged with insider trading of cryptocurrencies. Nikhil Wahi pleaded guilty on September 12th.
The conviction of a former OpenSea manager in an NFT insider trading case sets a precedent and highlights the importance of transparency and integrity in the rapidly evolving world of digital assets.