Washington: A former employee at leading NFT startup OpenSea has been charged with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens (NFTs).
OpenSea’s former head of product, Nate Chastain, used confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain, the US Attorney’s Office in the Southern District of New York (SDNY) said in a statement late on Wednesday.
OpenSea had fired Chastain after they determined the allegations were legitimate.
OpenSea was most recently valued at $13.3 billion by investors including Andreessen Horowitz (A16Z), Paradigm and Coatue.
“NFTs might be new, but this type of criminal scheme is not. As alleged, Chastain betrayed OpenSea by using its confidential business information to make money for himself,” said US Attorney Damian Williams.
In this case, Chastain launched an age-old scheme to commit insider trading by using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage.
“With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain,” added FBI Assistant Director-in-Charge, Michael J. Driscoll.
OpenSea is the largest online marketplace for the purchase and sale of NFTs.
OpenSea kept confidential the identity of featured NFTs until they appeared on its homepage.
After an NFT was featured on OpenSea’s homepage, the price buyers were willing to pay for that NFT, and for other NFTs made by the same NFT creator, typically increased substantially.
Chastain, 31, of New York is charged with one count of wire fraud and one count of money laundering, each of which carries a maximum sentence of 20 years in prison.
–IANS
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