3 mins readYou won't believe it! Nathanial Chastain, once a product manager at OpenSea, got a three-month jail term. Guess why? He was involved in a digital asset insider trading operation. Indeed, the US Department of Justice (DOJ) calls it a "first." They disclosed it in a Tuesday press release.
Nathaniel Chastain, center, and his attorney, David Miller, right, outside federal court in New York on Tuesday. PHOTO: YUKI IWAMURA/BLOOMBERG NEWS
Landmark Digital Asset Insider Trading Case
Nathan, now 31, quit OpenSea in 2021. His charge appeared in 2022. Manhattan's US attorney blamed him for abusing his power at OpenSea. What did he do? He selected the NFTs to show on OpenSea's home page. But not for a good cause! He wanted to make illegal profits.
Federal prosecutors said Chastain earned over $50,000 USD. How? He bought specific NFTs that he knew would be featured on OpenSea. He later sold them at higher prices. All this was done through nameless wallets and secret OpenSea accounts he made.
"Nathan Chastain used his own secret knowledge to get profits," said US Attorney Damian Williams to Reuters.
His trial started on April 24. It was thought it might last a week or two. Turns out, three days were all the jury needed! They agreed Chastain was guilty. They found him at wrong for wire fraud and money laundering.
But there's a twist! The case against Chastain was labeled as an "insider-trading scheme." You'd expect him to face insider-trading charges, right? Surprisingly, he faced none. Instead, the jury focused on wire fraud and money laundering. Forget any mention of "insider trading"!
His Prison Sentence
Guess what happened on Tuesday? Chastain got more than just jail time. He also faced home confinement for three months, then have three years of supervision.
He was fined $50,000 too. Remember the money from his NFT sales? Gone! And, the Ether (ETH) he earned from trading NFTs has to be returned. He has to give up 15.9 ETH. That's close to $26,000!
The sentence is quite less than the initial two-year term asked by federal attorneys. They referred to a previous insider trading case involving Coinbase. Instead, U.S. judge Jesse M. Furman, from New York, designed a less severe sentence. Why? He wanted the punishment to match Chastain's $50,000 illegal earnings from NFT sales.
The twist came during the hearing. Judge Furman stated a surprising fact. Fraud doesn't depend on dealing in securities or random goods. So, he rejected an application to dismiss the case, as reported by Fortune.
"Today, Nathan Chastain faced justice," said prosecutor U.S. Attorney Damian Williams. He exposed that Chastain violated OpenSea's trust for personal gain. "This punishment should warn corporate insiders. Insider trading is unacceptable in all markets," he added.
But what did Chastain say? "Two years ago, I failed the community. I lost sight of who I wanted to be," he admitted. "I'm sorry for dragging my friends and coworkers at OpenSea into this mess.”
What about the regulatory authorities like SEC and CFTC? They’re still arguing over who gets to regulate digital assets. But, the prosecutors aren't idle. They are actively enforcing rules against misappropriation and insider trading. Yes, even when it involves NFTs and cryptocurrency. And their message to SEC, CFTC, and lawmakers – get moving fast!
