First NFT insider trading case launched: Potential to set precedent for digital assets First NFT insider trading case launched: Potential to set precedent for digital assets
Entering uncharted legal territory: Ex-OpenSea manager's case sparks debate on insider trading in digital assets.
2 min read
Updated: Apr. 26, 2023 at 3:32 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Former OpenSea product manager, Nathaniel Chastain, is at the center of a groundbreaking criminal insider trading case involving digital assets.
Chastain has been accused of insider trading — marking the first criminal insider trading case involving digital assets, according to a Reuters report.
According to the report, Chastain has been accused of using confidential information to secretly purchase NFTs — later profiting by featuring and selling them on the OpenSea homepage.
Chastain charged by U.S. prosecutors
A jury hearing took place at the Southern district court of New York, following the U.S Manhattan Attorney’s Office filing allegations on May 31, 2022.
Chastain currently faces charges of wire fraud and money laundering after U.S. prosecutors accused him of “secretly buying dozens of NFTs based on confidential information,” according to the Reuters report.
The court documents present multiple examples of misconduct — including Chastain’s alleged purchase of four “The Brawl 2” NFTs through anonymous accounts, shortly before they were ‘featured’ on OpenSea. He then reportedly sold them for 100% profit within hours.
Defense lawyer denies insider trading
Chastain’s defense lawyer, David Miller, argues that his actions do not constitute insider trading.
“We are not talking about securities trading.”
In an April 17 filing, Miller said that OpenSea’s new policies “did not consider – or treat – the relevant information to be confidential.
Former U.S. Securities and Exchanges Commission (SEC) enforcement lawyer Philip Moustakis highlighted the cases importance and that the trial’s outcome could significantly impact the legal classification of NFTs.
“The case could have broader implications for assets that do not fit into existing regulations.”
“If this case sticks, there is precedent that insider trading theory can be applied to any asset class.”
Former U.S. Securities and Exchange Commission (SEC) lawyer Alma Angotti suggested the case could result in NFTs being categorized as securities under the Howey test. Angotti’s view was shared by Moustakis.
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Josh O'Sullivan
Josh has been writing for a decade and is passionate about mainstream crypto adoption, bringing positive financial change to the masses through crypto and decentralized finance as a whole.
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OpenSea is a decentralized peer-to-peer marketplace for buying, selling, and trading NFTs.