First-Ever Criminal Conviction for NFT Insider Trading- What Are Implications?
May 4, 2023
In a historic first, Nathaniel Chastian has been convicted of NFT insider trading. Nathaniel was a product manager at OpenSea, the first and largest marketplace for NFTs in the United States. In June 2022, he was charged with wire fraud and money laundering for exploiting confidential information to his advantage. He was accused of buying the NFTs he was to feature on OpenSea and then reselling them. Nathaniel allegedly made $50,0000 through insider trading of NFTs.
All eyes were set on this almost year-long trial for its historic nature which is being dubbed as the first-ever insider trading case for any digital assets. Nathaniel didn’t plead guilty as the defense argued that OpneSea had no standards for classifying information related to NFTs to be featured on the homepage as confidential.
Implications of Nathaniel Chastian NFT Insider Trading Case for Regularization of Digital Assets
in the United States The case is of significance with respect to NFTs’ status as marketable and tradable securities. It is to be noted that currently, there is no well-defined regulatory framework that deals particularly with the trading of NFTs and other digital assets. While NFTs give artists the power to claim ownership of their digital art and prevent theft and duplication, they can also aid money launders and criminals to commit financial fraud.
In the past few months, there have been a series of events that reinforce the need for a robust regulatory mechanism in the realm of digital assets.
Later in 2022, the collapse of the infamous cryptocurrency exchange FTX called for greater transparency regarding the trading of digital assets. Now, that Chastian has been convicted of NFT insider trading, there could be more need than ever for the US government to regulate the trading of crypto assets.
The US lawmakers are already calling for action in this regard. Digital Assets Anti-Money Laundering Act, that was introduced in Senate in December 2022, is an attempt to make Know Your Customer rules, inclusive of NFTs and other crypto-assets through information about trading participants and wallet owners. The authorities are already closely watching banks dealing with fin-tech companies. This NFT insider trading is likely to further fuel the urge for an integrated regulatory compliance regime about digital assets, like crypto-currencies and NFTs.
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