Nathaniel Chastain, the former product manager at NFT sales platform OpenSea, was sentenced on August 22 to three months in prison for secretly purchasing NFTs from his employer ahead of their release and selling them for profit. Chastain was in May convicted on charges of money laundering and fraud in federal court. Though each charge carried a maximum sentence of twenty years, wire service Reuters reported that prosecutors had sought a sentence of between twenty-one and twenty-seven months. Instead, Chastain will pay a fine of $50,000 and relinquish the 15.98 ETH (about $26,500) he gained from his illicit activities; once he is freed from jail, he will spend three months in home confinement and three years on probation. In addition, he will perform two hundred hours of community service.
Chastain resigned from his role at OpenSea in September 2021 after a Twitter (now X) user spotted his transactions online, thanks to the comparative transparency of the NFT transfer process, and contacted the exec’s employer directly. The FBI detained Chastain in June 2022.
U.S. District Judge Jesse Furman, who handed down Chastain’s sentence, described the process of determining an appropriate punishment for the disgraced exec as “difficult.” Furman pointed to the relatively small amount of money—roughly $50,000—involved in the illegal trades, saying he doubted charges would have been brought had the crime not been committed within the “slightly sexy” realm of cryptocurrency. The precedent-setting insider trading case generated a tremendous amount of attention, in that it was the first related to digital assets. Previously, the trading of NFTs had not been regulated by any legal standards.
“Nathanial Chastain faced justice today for violating the trust that his employer placed in him by using OpenSea’s confidential information for his own profit,” said prosecuting US attorney Damian Williams in a statement following Chastain’s sentencing. “Today’s sentence should serve as a warning to other corporate insiders that insider trading—in any marketplace—will not be tolerated.”
Chastain will remain free on bail until November 2; his lawyer is asking for that date to be pushed back while his client prepares an appeal.