In a case that could have seismic implications for the NFT and cryptocurrency sphere, a former product manager at OpenSea was convicted of money laundering and wire fraud in New York Federal Court on May 3.

It’s the first major NFT insider trading case with Nathaniel Chastain accused of leveraging his knowledge of which NFTs would feature on OpenSea’s homepage to profit financially. Between June and September 2021, Chastain made around $57,000 by buying dozens of NFTs, waiting for their value to rise on the back of OpenSea’s promotion, and then selling them—at “two- to five-times his initial purchase price,” the original indictment charged.

Chastain was forced to resign in September 2021 after allegations of his wrongdoing flooded social media. The U.S. Attorney’s office in Manhattan brought charges against him in June 2022.

Chastain’s lawyers claimed he hadn’t violated OpenSea’s policies and was being held to a standard that didn’t exist. “Nobody told Nate that he couldn’t use or share that information,” Chastain’s lawyer Daniel Filor told jurors.

In response, prosecutor Allison Nichols cited Chastain’s use of anonymous OpenSea accounts and wallets for the purchases as proof that “he knew that he had violated OpenSea’s confidentiality agreement,” she told the jury in closing arguments on May 1.

“Although this case involved trades in novel crypto assets, there was nothing particularly innovative about his conduct—it was fraud,” U.S. attorney Damian Williams said in a statement. “A jury has found that Chastain is guilty of using inside information for his own personal gain, and he now faces time in federal prison.”

Chastain is due to be sentenced on August 22, 2023. Wire fraud and money laundering each carry a maximum sentence of 20 years in prison.

The case was the first in a series related to digital assets initiated by the U.S. Attorney’s office in Manhattan in 2022 and could set a precedent for a sector that has to date largely operated with little oversight or legal scrutiny.

At the time of Chastain’s dismissal, OpenSea, which is the largest NFT marketplace, said it was implementing new staffing guidelines. OpenSea did not respond to a request for comment at press time.

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