A former OpenSea executive charged over an alleged insider NFT trading scheme is set for court on Monday, and his old boss appears to be firmly in his corner.
Nate Chastain was charged with wire fraud and money laundering in June over allegedly underhanded trades between Jan. and Sept. 2021, when crypto markets were red hot.
With insider knowledge, authorities say Chastain bought NFTs before they were featured on OpenSea’s front page, selling them for profit after the fact.
Chastain allegedly scooped up 45 NFTs on 11 different occasions, netting between two and five times his initial purchase price. One estimate suggested he’d earned around 19 ETH on the trades, worth as much as $73,000 then but $37,200 today.
To cover his tracks, Chastain allegedly used a number of crypto wallets and accounts. The charges represent the first ever case involving potential insider trading of NFTs, with each of his two counts carrying a maximum sentence of 20 years’ prison.
OpenSea’s CEO Devin Finzer told US prosecutors this week that the case against Chastain is “unfair” and affecting the former head of product’s mental health, per court documents. Blockworks has reached out to OpenSea for comment.
The government responded by requesting Chastain be barred from “asking Finzer or any witness their opinion about whether the prosecution is unfair or has negatively impacted the defendant’s mental health.” Judge Jesse Furman granted the government’s request.
Fair or not, insider NFT trading case rolls on
In a now-deleted blog post released shortly after Chastain was charged, OpenSea said it had enacted new policies to restrict team members from buying and selling promoted NFTs.
The New York firm also prohibited the use of confidential information to trade NFTs — whether available on OpenSea or not.
Chastain has filed five different motions to the court, including pleas to drop some evidence regarding his compensation from OpenSea and to exclude terms like “insider trading,” on grounds that NFTs weren’t securities.
However, Judge Jesse Furman denied each motion. “Chastain’s arguments about use of the term ‘insider trading’ are moot,” the judge said in a court order published on April 18.
The final pre-trial conference is scheduled to take place Thursday, and Chastain is expected to seek additional relief related to the court’s ruling using the term “insider trading.”
“Put simply, the trial in this case is about whether Chastain committed the charged crimes; it is not about whether the prosecution is fair or unfair,” Furman said.
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Source: https://blockworks.co/news/opensea-ceo-nft-insider-trading-case-unfair-ahead-of-trial