Nathaniel Chastain – former head of product at the NFT marketplace OpenSea – will spend three months in jail after being found guilty of insider trading. Prosecutors maintained that he bought numerous non-fungible tokens before they were featured on the platform’s home page and later sold them at much higher prices.
Chastain maintained he was not guilty of the accusations that he conducted wire fraud since the NFTs were not securities or commodities. US District Judge Jesse Furman dismissed that claim, asserting that the law doesn’t require trading in such financial products for it to be a fraud.
First Insider Trading Case Involving NFTs
The case against Chastain was partially finalized in May this year when a jury found him guilty of wire fraud and money laundering. The magistrates ordered him to forfeit 15.98 ETH (worth around $26,000 at the time) and pay a $50,000 fine.
In addition, the authorities determined in a recent court hearing that he was involved in insider trading, making over $57,000 by purchasing digital collectibles before OpenSea featured them on its home page and later selling them at substantial profits.
As such, the 33-year-old will go to prison for three months in what will be known as the first-ever insider trading case related to NFTs. He did not oppose the court’s decision, admitting that he let the community down with his actions:
“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.”
Speaking on the sentence was also Manhattan US Attorney Damian Williams, who believes it could serve as a warning to other individuals who might attempt to do such operations in the future:
“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. Today’s sentence should serve as a warning to other corporate insiders that insider trading – in any marketplace – will not be tolerated.”
The ‘Sexy New Arena’
Judge Furman said the court decision was “unusually difficult” given the nature of the accusations, questioning whether Chastain’s case would have reached court if it had not been “in a slightly sexy new arena.” However, he claimed that Chastain “knew exactly what he was doing, and he took advantage of an opportunity.”
While the wrongdoer faced up to 20 years in jail on each count, federal sentencing guidelines called for 21 months to 27 months. The prosecution urged Judge Furman to rule a punishment within that range so it could scare other potential fraudsters.
For his part, Chastain sought to stay out of prison, requesting only probation. Judge Furman seems to have found more or less a middle ground by sending him behind bars for three months.
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