Former OpenSea product manager Nathaniel Chastain will face trial for insider trading of non-fungible tokens (NFTs).
according to bloombergChastain is charged with one count of wire fraud and money laundering each. He could be sentenced to up to 20 years in prison for each count if found guilty.
The jury will oversee the first-ever NFT insider trading trial this week. In June 2022, Chastain was arrested following allegations from the community that he used confidential information from OpenSea for personal gain.
At OpenSea, Chastain’s role involved choosing which NFTs would appear on the homepage. After the rolls, the price of the kit usually goes up significantly. The community accused Chastain of buying NFTs before listings and then selling them through secret wallets.
300 lawyers support Nathaniel Chastain
More than 300 defense attorneys supported Chastain, stating, “Confidential business information is property that would lead to a staggering expansion of federal fraud and the criminalization of a wide range of behavior never before thought criminal.”
Chastain’s attorneys claim that the initial information prior to listing was not owned by OpenSea and held no inherent value to the company. They also argue that employees were not prevented from trading NFT token pools prior to Chastain’s last day.
In a filing, Chastain’s legal team wrote, “Its new policies tend to show that OpenSea has not considered – or treated – the relevant information as confidential.”
setting a precedent?
US government prosecutors say Chastain made $57,000 in profits trading NFTs based on insider information. However, they accused him of wire fraud instead to avoid controversy over whether NFTs are security.
Philip Moustakis, a former Securities and Exchange Commission (SEC) enforcement attorney and partner at Seward & Kissel LLP, said: Reuters This situation could have broader implications for assets that do not fit current regulations that prevent investment advisors, brokers and others from trading on material non-public information.
He added, “If this case continues, there is a precedent that insider trading theory can be applied to any asset class.”
Similarly, former Coinbase product manager Ishan Wahi pleaded guilty to wire fraud and money laundering charges in February. He was accused of insider trading to buy several cryptocurrencies prior to the Coinbase listings.
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