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Former NFT marketplace employee charged in first-ever digital asset insider trading case

·1 min read

Federal prosecutors announced the first ever digital asset insider trading case on Wednesday, accusing a former NFT marketplace employee of using confidential information to purchase NFTs before they would be featured on the homepage and shoot up in value.

An NFT, or Non-Fungible Token, is proof of ownership for a digital asset that is traded on the Ethereum blockchain and cannot be replicated.

Nathanial Chastain, a former product engineer for the largest NFT marketplace, OpenSea, was arrested Wednesday morning and charged with wire fraud and money laundering.

NFT IS 2021 WORD OF THE YEAR AMID CRYPTOCURRENCY SURGE, COLLINS DICTIONARY SAYS

He anonymously purchased about 45 NFTs shortly before they were featured on OpenSea's homepage, then sold them between two and five times his purchasing price after they shot up in value, according to the indictment.

"NFTs might be new, but this type of criminal scheme is not," U.S. Attorney for the Southern District of New York Damian Williams said Wednesday. "Today’s charges demonstrate the commitment of this Office to stamping out insider trading – whether it occurs on the stock market or the blockchain."

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OpenSea acknowledged last September that one of its employees had used confidential information to flip NFTs that were featured on the homepage.

"For a new, more open internet that empowers creators and collectors, we will need to bake in trust and transparency into all that we do," OpenSea co-founder Devin Finzer wrote at the time. "We’re committed to doing the right thing for our users and earning back the trust of the community we serve."