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. 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.
“As the world’s leading web3 marketplace for NFTs, trust and integrity are core to everything we do. When we learned of Nate’s behavior, we initiated an investigation 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.” an OpenSea Spokesperson told TechCrunch.
Update: Removed reference to Chastain continuing to be active on Twitter, he has not tweeted since September.