Nate Chastain, former Head of Product at OpenSea, has been charged with wire fraud and money laundering by the FBI. Chastain is accused of using insider information to purchase NFTs shortly before they would be featured on the OpenSea website.
According to US prosecutors, Chastain secretly purchased 45 NFTs on 11 different occasions using confidential information that those tokens, or others by the same creators, would eventually be featured on the homepage of the OpenSea website. The defendant would then sell these NFTs for a profit shortly after they were featured.
The scheme is reported to have run from June to September 2021, during which Chastain created anonymous ethereum wallets in an attempt to obfuscate his connection to the transactions. The operation came crashing down when twitter user 0xZuwu posted a thread accusing Chastain of the misconduct, in which he shows connections between Chastain's public ethereum wallet and the wallets that made the illicit purchases. Chastain resigned shortly after, following an official investigation by the company.
“When we learned of Nate’s behavior, we initiated an investigation and ultimately asked him to leave the company,” OpenSea said in a statement. “His behavior was in violation of our employee policies and in direct conflict with our core values and principles.”
Each of the charges against chastain carries a maximum 20 year prison sentence.