OpenSea is the cause of insider trading for NFT
In June, OpenSea was indicted for the first alleged case of insider trading by one of its executives related to the NFT world.
While the NFT market continues its decline (-80% compared to the previous quarter), which is also evident in the recently released report on the subject, and which refers to the third quarter of the year, the first sensational case of insider trading breaks out .
The case specifically concerns the largest platform dedicated to the NFT market, viz Open sea. 31-year-old Nathaniel Chastain, head of product for what is perhaps the world’s best-known NFT marketplace, OpenSea, who resigned when he was caught using inside information to profit from auctioning NFT products.
The allegations against OpenSea of insider trading on NFTs
The claim would imply the suspicious purchase and sale of 45 works between June and September 2021. Chastain has apparently denied all charges, although he immediately left OpenSea out of fairness to avoid drawing it into his lawsuits. According to the charges filed by the Department of Justice in the Southern District of New York, an arrest warrant was issued for the former OpenSea CEO (in the US, the rules against insider trading are very strict).
This would be first insider trading case relating to the NFT market and the first time that an insider trading case involving a digital asset such as NFTs has been prosecuted.
The fact that the sector still lacks precise and clear regulation must have made it much easier for Chastain, who was just responsible for selecting new works that would eventually be put on the platform. He had a role that allowed him to be the first to see works that were unknown to most, but which could also have potentially great value.
And this is where the idea of doing what is commonly referred to as insider trading must have been sparked in his mind, which is to take advantage of confidential advance news about a particular company to speculate on it by trading its securities.
Insider trading on NFTs: The OpenSea case
The mechanism used by Chastain was very simple and consisted of buying works on his behalf, before they were auctioned on OpenSea, and then reselling them at a greatly increased price (as much as five times higher).
When OpenSea became aware of the modus operandi of its 31-year-old product manager, they did not think twice about reporting him to the relevant authorities and forcing him to resign (according to what is a credible reconstruction made by some internal sources). He now faces up to 20 years in prison.
OpenSea closes deals to increase safety
On the other hand, OpenSea has just closed a cooperation agreement with fintech company Web3 Builders to launch Trust Check, a new system to combat the ever-increasing number of frauds carried out with cryptocurrencies.
Meanwhile, from a market perspective, a few days ago on OpenSea there was the first case of sale of a house on the platform, which sold for around $180,000.
To conduct this sale, an LLC (Company with limited liability) was allegedly established, which would have possession of the property. Through the purchase of NFT, ownership was simultaneously transferred to the buyer at OpenSea.
