OpenSea’s former head of product, Nathaniel Chastain, has reportedly been sentenced to three months in prison by a US District Judge in New York. The decision comes after a jury voted the man guilty of engaging in money laundering and wire fraud, while serving as one of the top officials in the world’s largest online marketplace for non-fungible tokens (NFTs). Built on blockchains, NFTs are digital collectibles inspired by games, artwork, or fictional characters. NFTs carry along a price value and uniqueness that helps its users in virtual ecosystems like metaverse games, as well as act as assets to liquidate if need be.
Chastain at OpenSea used to finalise which NFTs would be featured on the main page of the marketplace. Investigation has revealed that the 33-year-old managed to churn over $50,000 (roughly Rs. 41 lakh) by buying and selling at least 45 NFTs that he knew were fixed to be featured on OpenSea’s homepage, a report by CoinTelegraph said.
The court not only sentence Chastain to prison, but also directed him to pay a $50,000 (roughly Rs. 41 lakh) fine.
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
How the case unfolded
In September 2021, some members of the crypto community on Twitter started pointing out that Chastain could have been up to insider trading on OpenSea after several digital wallets related to NFTs were suspiciously traced back to him.
Hey @opensea why does it appear @natechastain has a few secret wallets that appears to buy your front page drops before they are listed, then sells them shortly after the front-page-hype spike for profits, and then tumbles them back to his main wallet with his punk on it?
— Zuwu (@0xZuwu) September 14, 2021
Reacting to the accusations, OpenSea had released a statement saying that the company was incredibly disappointed with the revelations. OpenSea had then asked Chastain to resign from the company after an internal company audit revealed that he was exploiting access to company’s internal details and unlawfully trading NFTs, Decrypt had reported at the time.
Last year, the US Department of Justice (DoJ) arrested Chastain, calling this case the first ever insider trading incident involving digital assets.
The verdict in this case is finally out, with Chastain’s lawyer arguing that the media coverage in this case has sent out a message to other potential criminals who fancy indulging in such activities.
As for Chastain, after his prison release he would be in home confinement for the next three months and will be under supervision for the next three years.
The now convicted OpenSea executive has also apologised for letting the NFT community down.
“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,” Chastain has been quoted as saying.
Back in May, former product manager for Coinbase Global Ishan Wahi pleaded guilty to criminal charges that he tipped off his brother Nikhil Wahi and a friend with confidential information about digital assets that would be listed on Coinbase.