FBI Targets Crypto-Economy With Arrest Of Former OpenSea Staff | Non-Fungible Tokens (NFT)

A former employee of the leading non-fungible token (NFT) market has been charged with wire fraud and money laundering offenses in a sign that US law enforcement will no longer turn a blind eye to the crypto economy.

Nathaniel Chastain quit his job as chief product officer at OpenSea, the biggest marketplace for NFTs — the unique crypto assets used to denote ownership of things like digital art — after being accused of insider trading.

He was arrested by the FBI in New York on Wednesday and charged, in a case that could prove concerning to other crypto players who assumed prohibited practices on regulated markets were fair game in the crypto industry. Far west.

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Chastain is accused of using his insider knowledge of the tokens that were going to feature on the front page of OpenSea’s website to buy them shortly before their presentation and sell them immediately, taking advantage of the increased awareness for a small profit each time. time.

US Attorney Damian Williams said: “NFTs may be new, but this type of criminal scheme is not…Today’s charges demonstrate this bureau’s commitment to rooting out criminal offenses. insiders – whether they happen on the stock market or the blockchain.”

Chastain’s alleged trades had been noticed at the time. Thanks to the open nature of the NFT market, where all transactions are written to a public database called blockchain, observers had spotted someone buying digital assets with a dubious timeline in September 2021.

The anonymous digital wallet used for transactions was soon linked via transactions to that of Chastain. OpenSea had not issued an explicit policy against such insider trading at the time and acted only after the Chastain transactions were discovered.

In May, an apparent insider trading scheme was uncovered on a major crypto exchange: an unidentified user would accumulate large positions in small cryptocurrencies shortly before they were listed. on major exchanges and then resell them with a profit in the bottom line. renewed interest. A Wall Street Journal report concluded that one such trade returned a profit of $140,000 on a $360,000 investment in less than a week.

But until Chastain’s arrest this week, there was wide debate about whether such practices were illegal, given the differing standards and practices in the industry. For example, the trading of so-called “shitcoins” — crypto assets created for the sole purpose of being bought and sold in a speculative market — is openly acknowledged to be rife with practices that would be illegal in a regulated market.

According to the pseudonym “shitcoin influencer” Epitaph, the latest wheeze to increase the value of coins focuses on “GN tokens”. He said it was referring to “tokens where the team will go out of their way to convince buyers that they are connected to bigger celebrities/musicians/tokens.

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“It’s no secret that everything we buy is a scam on some level. The question isn’t “is this token a scam”, because they all are, the question is, “Is this scam good enough to convince other people to buy?”

Chastain’s arrest comes as a group of more than 25 crypto experts wrote an open letter to the US Congress calling for greater regulation of the industry. “We implore you to take a truly responsible approach to technological innovation and ensure that individuals in the United States and elsewhere are not vulnerable to predatory finance, fraud and systemic economic risks on behalf of ‘a technological potential that does not exist,’ the group said. wrote.

Adding to regulatory pressure, on Thursday the Commodity Futures Trading Commission sued Gemini, a New York-based crypto exchange founded by the Winklevoss twins, alleging the company misled regulators about the possibility of market price manipulation. bitcoin in a successful effort to convince the agency to allow the creation of a bitcoin futures contract.

An OpenSea spokesperson said: “When we learned of Nate’s behavior we launched an investigation and ultimately asked him to leave the company. His behavior was in violation of our employee policies and in direct conflict with our core values ​​and principles.

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FBI Targets Crypto-Economy With Arrest Of Former OpenSea Staff | Non-Fungible Tokens (NFT)


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