June 3, 2022

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

The US Attorney’s Office for the Southern District of New York has announced the unsealing of an indictment charging Nathaniel Chastain, a former product manager at Ozone Networks, Inc. d/b/a OpenSea, with wire fraud and money laundering in violation of 18 USC §§ 1343 and 1956 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, in 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 the NFTs to be featured on OpenSea’s homepage.  Chastain knew that the selected NFTs were to be remain confidential until they were displayed on the homepage.  The value of an NFT typically appreciated with the increased demand for the NFT fostered by the publicity.  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, secretly purchasing NFTs on eleven separate occasions shortly before they were featured on the homepage, and then selling them for a profit once they appeared on OpenSea.  In an effort to conceal the fraud, Chastain allegedly made the purchases using anonymous digital currency wallets and accounts on OpenSea.

Chastain has pleaded not guilty to the charges against him.  

USAO of SDNY Press Release | Unsealed Indictment | Chastain Arraignment