The case that brought Nathaniel Chastain to court dates back to 2021. He is accused of having used confidential information to make a profit through NFTs. Since June 2022, the former OpenSea executive has been arrested.
Nathaniel Chastain’s conviction for insider trading, historic?
Indicted last June, Nathaniel Chastain is now fixed on his fate. This former head of OpenSea is convicted of fraud and money laundering. Justice accuses Chaistain of having improperly used confidential information from the NFT market. An approach that allowed him to make some $50,000 in profits.
Concretely, what the law holds against Chaistain is its unfair attitude on the market in question. Justice considers that by offering for sale NFTs previously acquired to make an undeserved profit, “Chastain abused his status at OpenSea”.
Because, moreover, the information used in the context of the operation was only accessible because of his status in the company. In other words, placed under the same conditions as the users, the operation would not have been as profitable for him. For the prosecutor, Allison Nichols, this decision is only justice.
Towards regulation of the NFT sector following the Chastain affair?
Chastain’s defense does not hear it that way. Indeed, the lawyers of the ex-executive consider that one applies to their client, a “standard that did not exist”. This is because at the material time, OpenSea had no predefined policy regarding sensitive information.
Their reasoning is that the confidential information whose improper use is alleged against Chastain “were not considered by OpenSea to be confidential at the time”.
The argument did not convince prosecutor Nichols. For the latter, the use by Chastain of an anonymous account to carry out the operation demonstrates his knowledge of the illegality of his act.
The least we can say is that this affair undoubtedly creates a major precedent. This is the first time that a sanction has been imposed for acts of insider trading on digital assets.
Could this be a first step towards the regulation of the NFT sector? All in all, it would not be useless for the actors of this ecosystem to avoid scandals relating to NFTs. This, possibly by strengthening their policy on sensitive information.
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