A former employee of the non-fungible tokens (NFT) market has been charged with cyber fraud and money laundering in a sign that US law enforcement will not turn a blind eye to the cryptocurrency economy.
Nathaniel Chastain quit his job as product manager at OpenSea, the largest market for NFTs – unique crypto assets used to denote Ownership of items such as digital art After being accused of trading based on inside information.
He was arrested and charged Wednesday by the New York FBI, in a case that could be troubling to others in cryptocurrency who have assumed that prohibited practices in regulated markets were fair game in the Wild West sector.
Chastain is accused of using his inside knowledge about the tokens that will be featured on the front page of the OpenSea website to buy them shortly before they appear and sell them right away, taking advantage of the growing awareness to make a small profit each time.
US Attorney Damian Williams said: “NFTs may be new, but this type of criminal scheme is not… Today’s accusations demonstrate this office’s commitment to eliminating insider trading – whether it takes place on the stock market or the blockchain.”
Chastain’s alleged trades were noticed at that time. Thanks to the open nature of the NFT market, where all trades are written into a public database called the blockchain, observers discovered that someone was buying digital assets with questionable timing in September 2021.
The anonymous digital wallet used for the cross-transactions was soon linked to Chastain. OpenSea at the time did not issue an explicit policy against such insider trading, and only acted after Chastain’s trades came to light.
In May, an apparent insider trading scheme was revealed on a leading crypto exchange: an unidentified user would build large positions in small cryptocurrencies shortly before they were listed on major exchanges, and then sell them for a profit on the output. increased interest. The Wall Street Journal report He concluded that one such trade generated a net profit of $140,000 on an investment of $360,000 in less than a week.
But until Chastain’s arrest this week, there was widespread debate about whether these practices were illegal, given the different norms and practices in the sector. For example, trading in so-called “shitcoins” – crypto assets created with no other purpose than to be bought and sold in a speculative market – is publicly acknowledged to be rife with practices that would be illegal in a regulated market.
According to the pseudonymous “Chitcoin Influencer”, the latest version to increase the value of coins Focus on Larp Tokens. He said this refers to “tokens that the team will do their best to convince buyers that they are connected to bigger celebrities/musicians/icons.
“It’s no secret that everything we buy is a scam on some level. The question isn’t ‘Is this code a scam’, because they all are, and the question is: ‘Is this scam done well enough to convince others to buy?’
Chastain’s arrest comes with a group of over 25 crypto experts He wrote an open letter to the US Congress Calling for more regulation of the sector. “We appeal to you to take a truly responsible approach to technological innovation and to ensure that individuals in the United States and elsewhere are not left exposed to predatory financing, fraud, and systemic economic risk in the name of non-existent technological potential,” he wrote.
Adding to the regulatory pressure, the CFTC on Thursday filed a lawsuit against Gemini, a New York-based crypto exchange. Founded by the Winklevoss twinsalleging that the company misled regulators about the possibility of bitcoin price manipulation in a successful attempt to persuade the agency to allow the creation of a bitcoin futures contract.
An OpenSea spokesperson said: “When we became aware of Nate’s behavior, we launched an investigation and eventually asked him to leave the company. His behavior violated our employee policies and directly contradicted our core values and principles.”