A former employee of the nonfungible token marketplace OpenSea has been arrested and charged on allegations of NFT insider trading.

Nathaniel Chastain, a former product manager at the company, is accused of wire fraud and money fraud by using confidential information about what NFTs would be featured on OpenSea’s homepage for his personal financial gain. Using his insider’s knowledge, Chastain is alleged to have purchased dozens of NFTs, which represent digital assets such as art and videogame objects, before they were featured on the service and then later sold them for profit.

In the indictment, filed in the U.S. District Court for the Southern District of New York, the Federal Bureau of Investigation claims that Chastain was responsible for selecting NFTs to be featured on OpenSea’s homepage. OpenSea kept information relating to what NFTs would be featured confidential, since when an NFT was listed on the homepage, the price buyers were willing to pay increased substantially.

From around June to September 2021, Chastain used the confidential information to buy the NFTs and then later flip them for a profit. In a typical transaction, Chastain’s profit would range between two to five times the price he had purchased the NFTs.

Chastain further tried to hide his alleged fraud by using anonymous cryptocurrency wallets and anonymous accounts on OpenSea.

“In this case, as alleged, Chastain launched an age-old scheme to commit insider trading by using his knowledge of confidential information to purchase dozens of NFTs in advance of them being featured on OpenSea’s homepage,” FBI Assistant Director-in-Charge Michael J. Driscoll said in a statement. “With the emergence of any new investment tool, such as blockchain-supported nonfungible tokens, there are those who will exploit vulnerabilities for their own gain.”

In response to the arrest, OpenSea told Coindesk that “his behavior was in violation of our employee policies and in direct conflict with our core values and principles.”

OpenSea founder and Chief Executive Devin Finzer first discussed the allegations in September without naming Chastain. While noting that the allegations were incredibly disappointing, Finzer added that OpenSea had “commissioned a third party to conduct a thorough review of the incident and make recommendations on how we can strengthen our existing controls.”

Chastain’s wire fraud and money laundering charges both have a maximum sentence of 20 years in prison.

Image: OpenSea