A top former executive at the highly valued NFT startup OpenSea was arrested Wednesday and charged “with wire fraud and money laundering in connection with a scheme to commit insider trading,” according to a press release from the U.S. Attorney’s Office in the Southern District of New York (SDNY).
TechCrunch previously covered the firing of former OpenSea Head of Product Nate Chastain. Chastain was accused of front-running purchases of NFT collections that he knew were about to be featured prominently on the homepage of OpenSea. His actions were discovered by other NFT buyers who analyzed his transactions on the Ethereum blockchain.
OpenSea soon fired Chastain after they determined the allegations were legitimate, though Chastain has continued to be active in the NFT community, especially on Twitter. The startup has noted that it didn’t have specific policies in place prohibiting this type of behavior beforehand but has since enacted new employee rules.
OpenSea was most recently valued at $13.3 billion by investors including Andreessen Horowitz, Paradigm and Coatue.
The Justice Department and SDNY U.S. Attorney’s Office have begun getting more active in prosecuting crypto crimes, but the NFT space has largely evaded much action, which made the announcement a bit of a shock to those in the crypto space.
“NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself. Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain,” said U.S. Attorney Damian Williams in the press release.
We’ve reached out to OpenSea for comment.