Chastain allegedly bought at least 45 NFTs in 2021 ahead of OpenSea featuring them on its homepage. He then sold the NFTs for 2x to 5x the price he had originaly paid for them.
OpenSea fired Chastain after his transactions were discovered on the Ethereum blockchain. The company admitted to not having policies in place to prohibit such behaviour but has since enacted new employee rules.
Nate Chastain, head of product of prominent NFT market OpenSea, has been called out for allegedly engaging in insider trading after eagle-eyed NFT investors spotted irregular movements between “secret wallets” and the employee’s main wallet.
Chastain is believed to have bought NFTs via anonymous wallets before they were released on OpenSea’s front page, and then selling them after they were featured, enabling him to profit from the increase in price. The funds were then transferred back into his main wallet. He has yet to respond to the criticism on Twitter.
OpenSea operates on the public blockchain Ethereum, which means that the transactions can be collectively viewed by anyone. The platform recorded USD 3.4 billion in transaction volume during the month of August.
Insider trading is frowned upon in the stock market. But in the largely unregulated and decentralised crypto space where anonymity is usually appreciated, no governing authority can mandate the illegality of front-running.
Is it illegal? Not yet. Is it unethical? Very. And when doing so one will undoubtedly face the wrath of a global community of crypto fanatics.