A former senior employee at the internet’s largest NFT trading platform has been arrested and named in the government’s first case alleging insider trading of digital assets, the Justice Department said Wednesday.
Nate Chastain, the former head of product at New York-based OpenSea, is accused of buying NFTs soon before the company planned to feature them on its homepage, profiting from their exposure and his company’s apparent endorsement, according to the Justice Department.
NFTs, short for nonfungible tokens, are digital assets rooted in the same basic technology as cryptocurrencies, and provide a way to prove digital ownership. Popularity of NFT artwork exploded during the pandemic, creating an estimated $40 billion market last year.
Charging documents allege that Chastain laundered at least 45 NFTs in 2021, each time selling them for two to five times what he had just paid for them.
An OpenSea spokesperson said the company had investigated Chastain over the incidents “and ultimately asked him to leave the company.”
“His behavior was in violation of our employee policies and in direct conflict with our core values and principles,” the spokesperson said.
A lawyer representing Chastain, David Miller, said in an emailed statement that “Mr. Chastain is not guilty of the charges. When all the facts are known, we are confident he will be exonerated.”
After a surge in popularity, interest in NFT art has begun to cool in recent months, and hackers and scammers have gravitated to the NFT trade.
Some NFTs have artificially risen in value because their owners have repeatedly sold themselves their own works, a scam known as wash trading. Others have successfully sold NFTs of other artists’ works without permission. Actor Seth Green recently claimed that a hacker’s theft of one of his NFTs was keeping him from finishing a new show.