Nathaniel Chastain, former Head of Product at OpenSea, the biggest non-fungible token (NFT) market, has been arrested and charged with wire fraud and cash laundering in reference to insider buying and selling in NFTs.
On Wednesday, prosecutors in New York’s Southern District accused the 31-year-old of “using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain.”
Chastain was accountable for deciding on NFTs that may be featured on OpenSea’s homepage as a part of his employment. Typically, the value of an NFT would drastically improve after it’s featured on the homepage.
Being conscious of this, in keeping with the Justice Department, Chastain allegedly purchased such NFTs after which dumped them shortly after they’d been featured on the homepage — for a considerable revenue.
The DOJ stated that Chastain used OpenSea’s confidential data between June 2021 and September 2021 to secretly buy “dozens of NFTs” simply earlier than they had been featured on the homepage and swiftly promote them “at earnings of two- to five-times.”
Chastain has reportedly bought the NFTs utilizing a number of secret wallets and nameless accounts on OpenSea.
According to US Attorney Damian Williams,
“NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself.”
As reported, an anonymous thread on Twitter in mid-September first revealed that Chastain might be using insider information to purchase NFTs.
Subsequently, OpenSea confirmed that they learned one of their employees purchased items using confidential information, without disclosing if it was Chastain.
“As the world’s leading Web3 marketplace for NFTs, trust and integrity are core to everything we do. When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company. His behavior was in violation of our employee policies and in direct conflict with our core values and principles,” a spokesperson for OpenSea said in an emailed comment to Cryptonews.com this week.
Meanwhile, the incident led to a discussion around the need for decentralized NFT marketplaces.
“Whether or not there is truth to the accusations of insider trading—OpenSea needs to use this as a catalyst to build a more decentralized platform,” said Compound Finance co-founder Robert Leshner on the time. “Centralized systems and their users are vulnerable to bad decisions by humans.”
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– Decentralization Debate Heats Up Again as MetaMask, OpenSea Block Users
– OpenSea’s New Marketplace Protocol Could Become ‘Uniswap Moment’ of NFTs
– Another Expensive NFT Gets Mistakenly Sold at Large Discount – How Does That Happen?
(Updated on June 3 at 18:08 UTC with a remark from OpenSea.)