Late last year news broke that for a brief moment caused OpenSea an enormous issue. One of OpenSea's product managers, Nathaniel Chastain, was taking advantage of insider information to profit off of NFTs.
His scheme to reap huge profits off of NFTs was extremely simple. Due to his position, he was able to see upcoming NFTs that would be highlighted or on the front page of OpenSea. This is a very coveted thing to have because of the visibility a project will get and causes the price of these NFTs to shoot for the moon. All that he had to do was buy the NFTs in the days before this was set to occur and then sell them after they were added to the front page.
OpenSea has claimed that it had policies in place to prevent this from happening but obviously they did not work. In my mind, the guy got jealous as with how the NFTs would at least double in value if not more you really only need to pull a trick like this a couple of times before you have secured a hefty bag. Chastain however did this from June to September of 2021 and only stopped when blockchain sleuths were able to trace some of these wallets back to him and publicly released their findings.
Once everything came to light he did quit his job at OpenSea and the company has since created two additional policies to prohibit this from happening again. While this was a huge setback and cast the company in a negative light it also proved something that others have long stated about crypto, NFTs, and the blockchain... it is all traceable. This also was not just regulators figuring this out and acting upon it rather it was the community policing itself.
As for why it has taken the government this long to act upon this information I think the answer is pretty simple. This is a new frontier and NFTs are new things that are not clearly defined in the current rules of law. However, this scam is, and once they were able to make sure that they could get a conviction with what is already on the books they were able to act and charge him. Since he has been charged with both wire fraud and money laundering and these charges each care up to 20 years in prison it is quite likely he and his attorneys cut a plea deal. That is actually another reason why they might have waited this long to charge him as it is common for these cases to be more or less settled before an individual gets charged. If they end up not agreeing though the government will charge them to apply more pressure.
This case will be interesting to follow and will probably be the first of several that come to fruition. It is important and vital that those who purposely exploit their position be punished accordingly. Since the government is able to act upon laws already on the books it does help alleviate some of the pressure to have the government enact strict and specific legislation.
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