The first case of NFT insider trading has come to a close as a US Judge has sentenced a former OpenSea employee to prison.
OpenSea Head Of Products Arrested For Fraud
Nathaniel Chastain, former Head of Products of OpenSea, the world’s largest non-fungible token (NFT) marketplace, has been condemned to three months in prison. The judgment was passed on Tuesday, August 22, after Chastain was found guilty of exploiting his position with OpenSea to obtain insider knowledge about specific NFT assets that were slated to be featured on the NFT marketplace.
The former executive was found convicted by United States District Judge Jesse Furman for using underground non-public information to conduct trades on NFTs assets for personal gain.
According to reports, Chastain had attempted to conceal his fraudulent activities by creating multiple digital wallets and OpenSea NFT accounts to purchase upcoming NFTs on OpenSea’s platform. Unbeknownst to Chastain, Crypto Twitter (now X) users had connected the majority of these wallets to his main wallet, effectively identifying him as a perpetrator of insider trading.
In addition to his jail term, Chastain has been ordered to pay a $50,000 fine and 200 hours of community service by the federal judge. He has also been ordered to relinquish 15.98 ether, which is presently worth about $26,000.
In the course of the trial, Chastain expressed his regret for his actions which led to the current legal proceedings. “I let down the company I was serving and lost sight of the person I aspired to be,” he said.
The 32-year-old was convicted earlier in May this year for fraud and money laundering. At the time, prosecutors working on the case alleged that Chastain had made over $50,000 from illegally selling NFTs about to be exhibited on the OpenSea homepage to traders. However, Chastain had pleaded not guilty to the accusations.
In 2021, Chastain was laid off from his position at OpenSea after the NFT marketplace conducted an investigation that revealed that the former executive was violating OpenSea’s community rules and regulations.
Consequently, Chastain lost valuable equity said to be worth millions of dollars in the company, as well as his reputation and prestige being tarnished after working in a multi-million dollar digital asset company.
Prosecutors File For 21 Months Incarceration
During the court case, prosecutors had appealed for 21-27 months imprisonment for Chastain, which would’ve meant the ex-OpenSea executive would’ve spent up to 2 years behind bars. They stated that the crime was similar to the crime committed by Ishan Wahi, a former product manager of Coinbase, who was arrested for wire fraud and sentenced to two years in prison.
Wahi and his accomplices had used inside knowledge of tokens scheduled to be listed on Coinbase to make illegal trading gains. However, unlike Chastain, Wahi pleaded guilty to the accusations of accumulating over $1 million in illegal profits from his insider trading.
Although Prosecutors compared the Wahi case to Chastain’s and pushed for a longer jail time, Chastain’s attorneys came back with the defense that the former executive had already lost his reputation, job, and considerable equity.
They eventually pleaded for no prison time even though the charges for Chastain’s crimes amounted to 20 years in prison.
Total market cap falls to $1.026 | Source: Crypto Total Market Cap on Tradingview.com
Featured image from Gadgets 360, chart from Tradingview.com