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Prosecutors claimed Nathaniel Chastain profited from inside information about which NFTs would be featured on the marketplace.
The former OpenSea manager who was accused of insider trading of NFTs has been convicted on May 3 of wire fraud and money laundering in a New York federal court, according to Reuters.
According to prosecutors, Nathaniel Chastain, a former product manager at OpenSea, was in charge of choosing which NFTs would be featured on the website’s nonfungible token marketplace.
After making these decisions, he frequently purchased these NFTs and then resold them after they had been featured, prosecutors said. He was charged with wire fraud and money laundering on June 1 in connection with these alleged transactions.
OpenSea's home page displaying featured NFTs. Source: OpenSea
The trial began on April 24 and has been watched closely by lawyers specializing in crypto-related issues. Some legal experts have argued that the outcome of the case may affect whether NFTs are considered securities.
According to the May 3 report, defense attorney Daniel Filor argued in the trial’s closing statements that Chastain wasn’t guilty because he had never been told the information was supposed to be confidential, stating “Nobody told Nate that he couldn't use or share that information."
By contrast, prosecuting attorney Allison Nichols argued that Chastain knew he was breaking the law. She claimed that he used anonymous OpenSea accounts to make the trades, implying that he was afraid of being caught.
“He hid what he was doing,” Nichols reportedly told the jury in her rebuttal. “He knew that he had violated OpenSea’s confidentiality agreement.”
It marks the first time a person has been slapped for using privileged knowledge to trade nonfungible tokens.
A former employee of Coinbase, Ishan Wahi, and his brother Nikhil were also charged with insider trading of cryptocurrencies in a separate case in July. In that case, Nikhil Wahi pleaded guilty on September 12.
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