Lowered: Ex-OpenSea employee sentenced in first NFT insider trading case
A former product manager at OpenSea, a well-known non-fungible token (NFT) marketplace, was found guilty on Wednesday of what US prosecutors described as the “first-ever insider trading of digital assets”. He now risks a maximum sentence of up to 40 years in prison.
A jury in New York convicted 32-year-old Nate Chastain of wire fraud and money laundering for using non-public information from his employer to trade NFTs in 2021. Chastain bought the NFTs in front of OpenSea with them on the website his, familiar with the NFTs. will increase sharply in price.
The US Attorney’s office in Manhattan claimed that Chastain had bought 45 NFTs in about 5 months and sold them for up to 5 times the price he paid, making tens of thousands of dollars in profits. Chastain’s trading activities were first revealed by scouts at the chain.
US prosecutors told the jury:
“He cheated, he stole, and he lied… He saw a way to make a little extra money, to capture some upside”.
and,
“He had information that would give him a leg up on all other NFT traders.”
While U.S. prosecutors used the words “insider trading” to describe Chastain’s alleged crimes, they did not bring traditional insider trading charges, which involve securities or commodities violations. Instead, they charged him with wire fraud and money laundering. Because of this, it was not necessary to determine whether the NFTs in question are securities or commodities in this case.
Before the trial, Chastain’s lawyers had fought to bar any mention of “insider trading” from the case, arguing that prosecutors had not formally identified NFTs as either a security or a commodity, taking liberties with the term. Rather than insider trading, the lawyers said Chastain’s actions were akin to an employee of an art gallery promoting his own painting and, as a result, fetching a higher sum for it. These arguments were rejected by the court.
The court also agreed that confidential information about which NFTs would be featured by OpenSea could be considered property, which was a key element of the prosecution’s fraud case. Prosecutors said OpenSea, which was founded in 2017, treated the information as confidential and that Chastain signed a confidentiality agreement when he started working for the company, which included a “protection of information” provision.
However, lawyers for Chastain argued that the information was not treated as confidential or proprietary by OpenSea, arguing that the relevant company rules were not clear. They also said OpenSea lacked a formal insider trading policy:
Not only were there no OpenSea policies, training or compliance programs to inform employees of any restrictions on trading NFTs, the government would have the jury believe that a generic confidentiality agreement, signed by newly hired employees, covered the conduct.
A policy that would have expressly prohibited the defendants from purchasing the NFTs in question was only put in place by OpenSea after Chastain’s transactions became public knowledge.
Following last year’s high-profile Coinbase insider trading case in which a defendant pleaded guilty, the OpenSea case establishes a significant precedent by using traditional fraud charges to prosecute digital asset trading based on insider information, bypassing the complex securities laws required to bring insider trading charges. The highly contentious question of whether fungible digital tokens or NFTs are securities or commodities will remain a heated ground for future debate.
The OpenSea and Coinbase cases are also an important reminder for Web3 companies to implement well-considered token trading policiespp to curb insider trading by employees and contractors and to prevent reputational fallout caused by insider trading of crypto-assets including NFTs. When considering whether to implement a token trading policy, it is important to instruct competent attorneys who are deeply familiar with both digital assets, corporate and financial services laws, and the unique issues that arise involving digital assets.
Building trust in Web3: Mastercard unveils crypto payment solution
Mastercard, the global payments giant, has launched a new customer verification solution for Web3 that is intended to increase trust in consumers and businesses that transact using blockchain technology. The solution, known as “Mastercard Crypto Credential,” was announced earlier this week and uses Mastercard’s CipherTrace blockchain analysis tool to verify trusted addresses and support AML/CTF compliance.
As part of the solution, users will receive a unique identifier called “Mastercard Crypto Credential”, which will allow them to verify immediately if an address they want to send money to has been checked by Mastercard and works according to the company’s compliance standards. Furthermore, the solution is designed to exchange basic transaction information to facilitate AML/CTF compliance and reduce the risk of loss of funds or fraudulent activities. If a bad actor obtains a unique identifier, Mastercard will have the ability to revoke the verification.
The Mastercard Crypto Credential is initially available to developers on the Aptos, Avalanche, Polygon and Solana blockchains. Mastercard also partners with wallet providers including Bit2Me, Lirium, Mercado Bitcoin and Uphold to facilitate cross-border transfers between the US, Latin America and the Caribbean,
Mastercard’s latest move deepens the growing involvement in digital assets in recent years. Recently, the company launched a nonfungible token (NFT) gated music accelerator program in partnership with Polygon, offering free access to materials, unique AI tools and other experiences to holders of Mastercard’s Music Pass NFT.
Mastercard’s rival, Visa, is also stepping up its involvement in digital assets, announcing a new stablecoin payment-focused project on April 24, 2023 through a new job posting. Visa’s Head of Crypto, Cuy Sheffield, said in a tweet:
We have an ambitious roadmap for crypto products @Visa and just opened some requests for senior software engineers to help us drive mainstream adoption of public blockchain networks and stablecoin payments.
Visa and Mastercard, as well as other traditional “big money” companies like Venmo and NAB, are increasingly pushing ahead with their Web3 plans. Despite crypto winters, financial companies continue to look to blockchain technology as a source of innovation and, unlike in previous years, are increasingly building crypto solutions for public rather than private blockchains.
Coinbase launches international exchange after American cryptocurrency
Coinbase Global Inc. plans to expand its operations by launching a derivatives exchange targeting institutional crypto traders based outside the United States. The newly launched platform, called Coinbase International Exchange, will list perpetual futures for Bitcoin and Ether starting this week after receiving a license from the Bermuda Monetary Authority.
The move will allow Coinbase to compete with offshore players such as Binance, which has already established a strong foothold in the crypto derivatives market. Currently, the international exchange will only be available in Bermuda and for non-US institutional clients upon application.
Coinbase is doubling down on international expansion at a time when the blockchain industry is facing increased regulatory challenges in the US. Coinbase received a Wells notice from the SEC earlier this year alleging possible securities violations despite its consistent efforts to engage with US regulators and seek regulatory clarity for the cryptocurrency industry. Those efforts culminated last week with Coinbase initiating administrative proceedings against the SEC to seek a response to a petition it filed last year asking the SEC to exercise its rules to establish a tailored regime for digital securities.
According to Coinbase, perpetual futures account for 75% of global crypto trading volumes. Perpetual futures offer a way for investors to gain exposure to cryptocurrency without having to own the underlying asset. Crypto traders often use perpetual futures to hedge against losses or speculate on the underlying tokens’ prices using leverage. These contracts have no expiry date and can be held as long as the investor wishes.
On the Coinbase International Exchange, qualified investors will be able to access perpetual futures contracts with up to five times leverage. All trades will be settled with USD Coin ($USDC), the stablecoin issued by Circle Internet Financial Ltd., in partnership with Coinbase.
In a recent blog post, Coinbase reaffirmed its commitment to the US market, but criticized the country’s regulatory approach, calling it a “disappointing trend.” The company generated 84% of its revenue from the US market last year, where it is most recognized. With a number of other US-based exchanges rumored to have received Wells Notices, it seems likely that major exchanges will continue to pursue growth internationally as other jurisdictions, such as the EU, UK, Hong Kong and Australia, move forward with appropriate regulations. regimes for crypto assets.
Sports Illustrated Launches Box Office NFT Ticketing Platform
American sports magazine Sports Illustrated has announced the launch of its own NFT-based ticketing platform on the Polygon Network. The platform, called “Box Office” will allow fans to buy and own digital collectibles that represent event tickets. Following in the footsteps of Ticketmaster, the move aims to revolutionize the way sports fans buy tickets and interact with live events.
Published by “SI Tickets”, a subsidiary of Sports Illustrated, Box Office will allow event owners, promoters and hosts to create, manage and market scalable NFT tickets. SI Tickets’ CEO, David Lane, expressed his positive view of the digitization of ticketing:
Blockchain is the future of ticketing, and now owners, promoters, hosts and attendees have access to an advanced ticketing experience that transforms the antiquated barcode into engaging and collectible content.
SI Tickets has also announced a partnership with blockchain software company ConsenSys to create a “Super Ticket” that allows attendees to scan NFT tickets for benefits such as expedited entry, drink vouchers, music downloads and receive video content and post-event rewards. .
ConsenSys Global Co-Head, Johnna Powell said:
We believe the partnership with SI Tickets will make it easier for owners, promoters and facilitators to create a fan experience that reaches previously unseen levels of engagement
Leveraging Polygon’s fast and low-cost blockchain infrastructure, Box Office aims to provide a seamless ticketing experience for sports fans while reducing the risk of fraud and counterfeiting.
The launch of Box Office represents a significant step forward in adopting blockchain technology in the sports industry. By using NFTs to represent event tickets, Sports Illustrated and its partners are creating a more secure and transparent ticketing system that benefits both fans and event organizers.
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