Nathaniel Chastain former head of product at OpenSea, has been sentenced to three months in prison for making tens of thousands of dollars through insider trading during his time working at the NFT marketplace.
Chastain had been convicted of money laundering and fraud in a New York federal court in May, putting an end to what the legal establishment is calling the first stand-out insider-trading case in the cryptosphere. According to the US Justice Department, Chastain bought and sold at least 45 NFTs he knew would be featured on OpenSea’s homepage to the tune of more than $50,000, using anonymous wallets and OpenSea burner accounts to cover his tracks.
Chastain’s abbreviated sentence reflects the relatively modest earnings he made from his crimes, and will be paired with three months of home confinement and three years of subsequent supervised release.
“Today’s sentence should serve as a warning to other corporate insiders that insider trading—in any marketplace—will not be tolerated,” Damian Williams, US Attorney for the Southern District of New York, said in a statement.
Chastain’s defense had initially argued that the case should be dismissed due to the fact that NFTs are not securities; the judge disagreed. Chastain was arrested several months after his departure from OpenSea in September 2021, after an internal investigation found that he had violated codes of conduct at his workplace. His lawyers attest that Chastain lost millions of dollars of equity at OpenSea.
Chastain’s sentencing is just one insider-trading case hitting the realm of digital assets in recent months. In May, a former product manager at crypto exchange Coinbase was sentenced to two years in prison on two counts of conspiracy to commit wire fraud. In June, crypto watchdog Solidus Labs released a study claiming that insider trading was taking place with 56% of crypto token listings.
