It is reported that US prosecutors are pursuing an insider trading case in the cryptocurrency industry On Wednesday local time, prosecutors in the Southern District of New York accused and arrested Nathaniel chastein, a former product manager of opensea, an online trading market The 31 year old suspect faces a telecommunication fraud crime and a money laundering crime, involving a plan to conduct insider trading on non forgeable tokens (NFTs). The prosecution said that he "used confidential information about which NFTs will appear on the opensea home page to obtain personal economic benefits".
The US Department of Justice said in a press release that the maximum penalty for each charge the suspect faces is 20 years' imprisonment. Ministry of justice officials said that this is the first time they have investigated the insider trading allegations involving digital assets.
Chastan's plan is relatively simple. According to the indictment, chastan's task is to select NFT and make it appear on the opensea home page. Opensea will keep the content displayed on these home pages confidential until they go online, because the presence on the home page often means that an NFT will become hot content, and the price of NFT made by the same Creator will increase significantly.
According to the indictment, from June to September 2021, chastan will secretly purchase these NFTs before opensea places his works on the front page of the website. Once these NFTs appear on the home page, it is said that he will sell them "at a profit of two to five times the initial purchase price".
The Ministry of Justice said that in order to cover up his whereabouts, he chose to trade with an anonymous digital currency wallet and an anonymous account on opensea. The Ministry of Justice said that this had happened dozens of times.
US prosecutor damianwilliams said: "NFT may be a new thing, but such criminal plans are not new. Today's allegations show that we are committed to eliminating insider trading, whether it occurs in the stock market or blockchain."
Michael J. Driscoll, assistant director in charge of the Federal Bureau of investigation (FBI), said that the Bureau would continue to actively pursue those suspects who chose to manipulate the market in this way.
Until September 2021, when chastan was first exposed for alleged misconduct, the company was relatively loose in terms of restrictions on employees' use of privileged information to invest in non-financial products.
Since then, the company has issued two new employee policies, including prohibiting opensea team members from buying and selling collections or creators when the company introduces or promotes them, and prohibiting employees from "using confidential information to purchase or sell any NFT content, whether it is provided on the opensea platform or not".
The change of time has exposed the regulatory loopholes in the cryptocurrency ecosystem. NFT, in particular, exists in a legal gray area. They are not formally considered securities, nor are there many legal precedents surrounding digital assets as a whole. Therefore, until today, before chastan was arrested, no one knew whether the prosecutor would take action against NFT's insider trading.
Boaz Sobrado, a financial technology data analyst in London, said that the opensea scandal illustrated two things. First of all, the transparency of blockchain makes it a powerful tool to monitor evil acts, because all transactions are public and always recorded. But until today's arrest, regulators have not taken action on this information. "There are a lot of regulatory issues now, but many of the things these misbeholders do are now clearly against the law. Regulators do not need to expand their powers to combat such fraud and misleading statements," he said
Secondly, in this field, it is easy to obtain illegal income, so the offenders are too lazy to cover up their tracks. "This once again shows the kind of unbridled madness that is happening in this field. Although the prospects are good and everyone feels rich, once the market declines, many people will be exposed," he said