Fraudster imprisoned

A former product manager at the digital asset market OpenSea, who was convicted in the first prosecution for insider trading of non-fungible tokens (NFTs), has been sentenced to jail time.

Nathanial Chastain, a former employee of Ozone Networks Inc. (which does business as OpenSea) was previously convicted of wire fraud and money laundering in connection with a scheme to trade NFTs based on insider information he had about which tokens would be listed on OpenSea’s homepage — a step that typically caused the tokens’ price to rise, along with the prices for other tokens from the same NFT creator.

“From approximately June to September 2021, Chastain used OpenSea’s confidential business information about what NFTs were going to be featured on its homepage to secretly purchase dozens of NFTs shortly before they were featured,” U.S. authorities alleged.

They reported that he later sold those same NFTs for multiples of the initial purchase price.

Now Chastain has been sentenced to three months in prison, three months of home confinement, and three years of supervised release. He was also fined US$50,000, and ordered to forfeit the Ethereum tokens that he made from illegally trading the featured NFTs.

“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,” said Damian Williams, U.S. attorney for the Southern District of New York, in a release. “Today’s sentence should serve as a warning to other corporate insiders that insider trading — in any marketplace — will not be tolerated.”