Former OpenSea Executive Sentenced to Three Months Jail For Insider Trading

Updated: 23 August 2023

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A former OpenSea executive was sentenced to three months in prison for insider trading in non-fungible tokens (NFTs).

Nate Chastain, previously the head of product at the NFT marketplace, was accused of taking advantage of and making personal gains from his authority to decide which NFTs were to be showcased on OpenSea’s front page.

“Nathanial Chastain faced justice today for violating the trust that his employer placed in him by using OpenSea’s confidential information for his own profit,” said US attorney Damian Williams. “Today’s sentence should serve as a warning to other corporate insiders that insider trading – in any marketplace – will not be tolerated.”

OK- near end of sentencing in US v Nate Chastain, described as 1st "NFT insider trading" case. But loss/gain amount is less than $50,000, defense lawyer Miller (who also repped Wahi) says. Judge has taken 5 minute break before announcing sentence. Watch this feed pic.twitter.com/KyeScdCGAP

— Inner City Press (@innercitypress) August 22, 2023

OpenSea Resignation

In September 2021, Chastain resigned from OpenSea following allegations on social media accusing him of using his influential position for personal gain. This involved promoting NFTs on OpenSea’s main page with the knowledge that it would increase their value.

Chastain was arrested a few months after his exit from the platform. The company had asked for his resignation following an internal inquiry. The investigation revealed Chastain had not upheld certain commitments to the OpenSea community. As a fallout of these events, Chastain had to relinquish his stake in the company, which according to his lawyers was worth several million dollars.

Nate Chastain Vs the United States DOJ

According to the U.S. Justice Department, Chastain secretly purchased and subsequently resold around 45 NFTs. Between June and September 2021, Chastain purchased these NFTs, aware that these would be listed on OpenSea.

Then, after their prices escalated due to the added visibility, he resold them at a higher price. Chastain made profits worth $50,000 and prosecutors said that he masked the transactions by employing anonymous wallets and distinct OpenSea profiles.

During the legal proceedings, Chastain’s defense argued for the case’s dismissal. Their basis was that NFTs, unique digital tokens often linked with digital art ownership, aren’t securities. They also argued that Chastain utilized non-confidential information.

Chastain’s eventual three-month sentence is considerably less than the approximately two years the prosecutors recommended. They had drawn parallels with an earlier insider trading case associated with Coinbase. The judge attributed the sentence to the relatively modest gains he made from his insider trades.

At the hearing, Chastain expressed regret saying, “I am here today because two years ago I let down the community I was serving and lost sight of the person I aspired to be. I’m sorry for putting my colleagues and friends at OpenSea through this ordeal.”

A statement released by the Department of Justice (DOJ) said, “In addition to the prison term, CHASTAIN, 31, of New York, New York, was sentenced to three months of home confinement, three years of supervised release, a $50,000 fine, and ordered to forfeiture the Ethereum he made trading the featured NFTs.”

Insider trading is committed when an individual capitalizes on non-publicly available information for personal advantage and prioritizes personal profit over a duty to an employer or the general public.

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