A former manager at the non-fungible token (NFT) marketplace OpenSea has been convicted in the first ever case of insider trading involving digital art.
Nate Chastain was found guilty of using anonymous Ethereum (ETH) wallets to buy the NFT work of artists who were due to be featured on OpenSea’s marketplace.
During the booming NFT market of 2021, being featured on OpenSea usually led to an increase in the value of an artist’s digital work.
Chastain was found to be using privileged information to buy the NFTs that he knew were likely to increase in value and then selling them for a profit.
In June 2022, Chastain was arrested by the FBI and charged with insider trading.
Now that he has been convicted in a jury trial, Chastain faces several years in federal prison once sentenced by the judge in the case.
Chastain’s lawyers argued during the trial that because NFTs are not yet considered securities, the crime of insider trading wasn’t applicable in this case. Jurors ultimately rejected that argument.
The case turned on whether the jury believed Chastain’s knowledge of upcoming featured artists amounted to confidential business information that he exploited for personal gain.
For its part, OpenSea says it has implemented new policies prohibiting employees from trading in featured artists’ products, or from using confidential information in their trading activities.
Chastain’s use of anonymous wallets to cover his tracks online was one piece of evidence that indicated he was aware that he was breaking the law.
Chastain is scheduled to be sentenced on August 22 of this year.
