NY federal prosecutors announce first-ever digital asset-related insider trading charges

The US Attorney’s Office for the Southern District of New York recently announced that it had unsealed an indictment related to charges for the first-ever digital asset insider trading scheme.  On June 1, 2022, federal prosecutors revealed charges against Nathaniel Chastain, a former product manager at Ozone Networks, Inc. d/b/a OpenSea, for wire fraud and money laundering in violation of 18 USC Section 1343 and Section 1956, respectively, for his alleged role in an insider trading scheme involving Non-Fungible Tokens (NFTs).  Chastain is accused of using confidential information related to the identity of NFTs that would be featured on OpenSea’s homepage for his personal financial gain, a violation of the duty of trust and confidence he owed to his former employer OpenSea, the largest online market place for the purchase and sale of NFTs.

According to the complaint, as part of his employment with OpenSea, Chastain was responsible for selecting which NFTs would be featured on OpenSea’s homepage – NFTs that Chastain knew were to be remain confidential until they were displayed on the homepage.  After an NFT was featured on the homepage, its value typically appreciated due to an increase in publicity that led to an increased demand for the NFT.  Federal prosecutors allege that, between approximately June 2021 and September 2021, Chastain misappropriated OpenSea’s confidential business information related to the identities of featured NFTs when he secretly purchased NFTs on eleven separate occasions shortly before they were featured on the homepage and then sold them for a profit after they were displayed on the site.  In an effort to conceal the fraud, Chastain allegedly made the purchases using anonymous digital currency wallets and accounts on OpenSea.

At the June 1, 2022 arraignment, Chastain was released on $100,000 bail and pleaded not guilty to the charges against him.  

USAO of SDNY Press Release | Unsealed Indictment | Chastain Arraignment

 
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