An FBI indictment against former OpenSea employee Nathaniel Chastain charges him with money laundering and wire fraud, related to the purchase and sale of non-fungible tokens (NFTs). The scheme was allegedly designed to profit from the company’s success by using confidential information about the OpenSea homepage to make a substantial amount of money. While the charges may seem unrelated, they are indicative of a larger pattern of insider trading.
As the largest online marketplace for NFTs, OpenSea is vulnerable to insider trading. An employee of OpenSea was responsible for choosing which NFTs would appear on the company’s homepage. The identity of the featured NFTs was kept confidential until they appeared on OpenSea’s homepage, which in turn increased the price for buyers. Despite this, the government is attempting to make the employee pay a fine.
Chastain was charged with money laundering and wire fraud for allegedly using a cryptocurrency-based investment account to purchase and sell NFTs. While his actions were atypical, they show that the technology behind these tokens is susceptible to exploitation by criminals. As a result, the FBI charged Chastain with money laundering and wire fraud, which carry a maximum sentence of 20 years in prison. Furthermore, the charges came amid wobbles in the global NFT market. Sales of OpenSea’s NFTs peaked in January, but dropped to less than $2 billion in March. Asia has been seen as a potential hub for NFT sales.
The scheme involved Chastain, who was responsible for choosing which NFT projects would appear on the homepage of OpenSea. While the company kept this information confidential, Chastain secretly bought NFTs and sold them for two to five times the price of their initial purchase. In the end, he made between $25,000 and $4,000 after converting the profits into cash. The scheme allegedly lasted from June to September last year and involved the creation of anonymous digital currency wallets and accounts on OpenSea.