On May 3, 2023, a federal jury in the Southern District of New York found Nathaniel Chastain, a former manager at OpenSea, the world’s largest marketplace for a leading non-fungible tokens (“NFTs”), guilty of wire fraud and money laundering in connection with the sale of NFTs he knew would be featured on OpenSea’s homepage.  Chastain was indicted last year on charges that he used material, non-public information he possessed about which NFTs would be displayed on the marketplace’s homepage to secretly purchase those NFTs minutes before they were displayed, and then sell them at two to five times the purchase price shortly thereafter for personal profit.  Prosecutors alleged that Chastain made $57,000 in fraudulent profits through the scheme.  Chastain also allegedly attempted to conceal his trading by using anonymous accounts and wallets to purchase and sell the NFTs.

This case represents both the first digital asset insider trading scheme ever charged, and the first conviction at trial for such a scheme.  Because prosecutors charged Chastain with insider trading under the wire fraud statute instead of under the securities laws, prosecutors avoided litigating whether the NFTs at issue constitute securities. The prosecutors’ success in this case is likely to spur further Department of Justice activity in this space.