Former NFT Marketplace employee charged with first-ever digital asset insider trading scheme | USAO-SDNY

Damian Williams, United States Attorney for the Southern District of New York, and Michael J. Driscoll, Deputy Director in Charge of the Federal Bureau of Investigation’s (“FBI”) New York Field Office, today announced the the unsealing of an indictment accusing NATHANIEL CHASTAIN, former Chief Product Officer at Ozone Networks, Inc. d/b/a OpenSea (“OpenSea”), of wire fraud and money laundering in connection with a scheme to engage in insider trading on non-fungible tokens, or “NFTs”, using confidential information about NFTs that were going to be featured on the OpenSea homepage for his personal financial gain. CHASTAIN was arrested this morning in New York, New York and will appear in United States District Court for the Southern District of New York today.

US Attorney Damian Williams said: “NFTs may be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using his confidential business information to make money for himself. Today’s charges demonstrate this office’s commitment to stamping out insider trading – whether it occurs in the stock market or on blockchain.

FBI Deputy Director-in-Charge Michael J. Driscoll said: “In this case, as alleged, Chastain engaged in an age-old scheme to engage in insider trading by using his knowledge of confidential information to buy dozens of NFTs before they are featured on the OpenSea homepage With the emergence of any new investment tool, such as non-fungible blockchain-supported tokens, some will exploit vulnerabilities The FBI will continue to aggressively pursue players who choose to manipulate the market in this way.

As alleged in the indictment unsealed today in Manhattan federal court:[1]

This case concerns insider trading in NFT on OpenSea, the largest online marketplace for buying and selling NFT. In violation of the duties of confidence owed to his employer, OpenSea, CHASTAIN exploited his advanced knowledge of the NFTs that would be featured on the OpenSea homepage for his personal financial gain.

As part of his job, CHASTAIN was responsible for selecting NFTs to feature on the OpenSea homepage. OpenSea has kept the identity of the submitted NFTs confidential until they appear on its homepage. After an NFT was featured on the OpenSea homepage, the price buyers were willing to pay for that NFT, and for other NFTs created by the same NFT creator, generally increased significantly.

From at least June 2021 to approximately September 2021, CHASTAIN used OpenSea’s confidential business information about the NFTs that were to be featured on its homepage to secretly purchase dozens of NFTs shortly before their presentation. . After these NFTs were featured on OpenSea, CHASTAIN sold them at a profit of two to five times their original purchase price. To conceal the fraud, CHASTAIN made these purchases and sales using anonymous digital currency wallets and anonymous accounts on OpenSea.

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CHASTAIN, 31, of New York, New York, is charged with one count of wire fraud and one count of money laundering, each carrying a maximum sentence of 20 years in prison.

The maximum potential penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant will be determined by a judge.

Mr. Williams praised the remarkable work of the FBI. Mr. Williams also thanked the National Cryptocurrency Enforcement Team for their help in the investigation.

This matter is being handled by the Bureau’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Thomas S. Burnett and Nicolas Roos are charged with the prosecution.

The counts in the indictment are charges only and the accused is presumed innocent until proven guilty.

[1] As the introductory sentence indicates, the entire text of the indictment and the description of the indictment contained in this press release constitute allegations only, and each fact described must be addressed. as an allegation.

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