Reported by Torey Akers

The first-ever insider trading trial in the US involving digital assets is getting underway, and the focus is on art, not stocks. A former product manager at OpenSea, the largest NFT(non-fungible token) marketplace, has been accused by the Manhattan District Attorney’s office of violating confidentiality procedures in order to sell his collection at an inflated profit.

Photo by PiggyBank on Unsplas

The landmark trial, which is undergoing jury selection this week in Manhattan federal court according to Bloomberg, raises big questions about the ethical guardrails in the cryptocurrency world and could permanently shift the popular understanding of “insider trading”.

Nathaniel Chastain was responsible for curating highlighted tokens for OpenSea, which typically led the assets to surge in price. While OpenSea’s company policy held that featured tokens would not be released until their arrival on the marketplace’s homepage, prosecutors say that Chastain bought the designated tokens in bulk and sold them after their identity was made known to the public at up to five times their original value.

Instead of charging Chastain with securities fraud, a transgression that typically involves exploiting clandestine information on stocks or acquisitions, the prosecution alleges that Chastain committed wire fraud. This framework allows prosecutors to sidestep a formal declaration on whether or not an NFT can be considered a security, a much-debated topic in the digital asset realm. Chastain has argued that because NFTs are neither securities nor commodities, they can’t be considered “misappropriated property”; he further insists that his trades do not constitute money laundering because they occurred on a public blockchain.

Chastain’s case arrives in the wake of a watershed lawsuit against Dapper Labs, developer of the NBA Top Shot NFT marketplace where fans can buy, sell and trade non-fungible professional tokens featuring basketball video clips. Dapper Labs was accused of selling unregistered securities, known as “Moments”, in the form of NFTs.

Read full report: https://www.theartnewspaper.com/2023/04/25/nft-insider-trading-trial-opensea