Inside Trading Sends Former OpenSea Employee to Jail
Inside Trading Sends Former OpenSea Employee to Jail
Nate Chastain is facing 3 months in prison on top of $50k in fines in the first-ever digital asset inside trading scheme to be convicted. Did the punishment fit the crime?
TylerD's Market Summary
GM!
Today's top news includes:
Nate Chastain faces 3 months in prison
$1M BAYC sweep not enough to move floor
75% of PFPs haven't traded in 2023
Bitcoin falls below the 200-day moving average
Mercedes NXT announces new NFT collection
👮♂️ Nate Chastain Goes to Prison
The first-ever digital asset inside trading scandal may be coming to a close.
Yesterday, former OpenSea employee Nate Chastain was officially sentenced to 3 months in prison for an inside-trading scheme.
Now that the sentence is finally in, the question becomes - did he get off light? And who's next?
What Happened
As a quick recap, Nate Chastain used his position as a Product Manager at OpenSea to promote NFT projects on its homepage from June-Sept 2021 while simultaneously using anonymous wallets to trade them for profit.
Onchain sleuths pointed out the activity back in 2021, which led to Nate's exit from OpenSea.
He was officially convicted of wire fraud and money laundering at trial.
How much did he make via these crimes? 15.98 ETH.
Not a tiny sum, but also not a major windfall. For those actively trading in Summer 2021, many traders were making 16+ ETH per month (if not per week) back in those days.
And now he pays the price.
The full penalty entails:
3 months in prison
3 months home confinement
200 hours of community service
Fine of $50,200
Forfeiture of 15.98 ETH
So he had to give the profits back, got fined another $50k, and is getting 3 months in prison - on top of losing his job and likely career options in Web3.
Does the punishment fit the crime?
Reactions to Nate's Sentence
NFT and Crypto Twitter seem to be falling into 2 camps - that the penalty was way too light or too severe.
Deeze weighed in, calling it a "Good deal but bad deal too" after referencing the 30 ETH fine and also comparing it to the other scams that have thus far gone unpunished in the space.
On the flip side, Martin Shkreli also joined the convo, saying "the shortest sentence known to man" and going on to clarify that "they say that if you get less than 10 years as a federal sentence, there was no point in charging you. no one gets less than a year. 'a year and a day' is considering the shortest federal sentence. 3 months is like... unheard of."
My initial reaction was that the penalty felt heavy for the crime, specifically the amount gained (16 ETH or around $50k).
But at the same time, inside trading has to be punished at least somewhat severely or no one will be prevented from doing it. And many are saying that 3 months isn't enough to prevent bad actors from following in Nate's footsteps here - hard to disagree with them.
Why It Matters
While this was a fairly heavily publicized case from the beginning, it shows how justice can indeed be served years after a digital crime is committed.
And just because many of the scams and hacks we have seen in the space over the past few years have gone unpunished, the actions are still recorded on the blockchain.
I personally expect an enforcement wave to come in the next 1-3 years. This is just the beginning.
Bad actors should be on alert and looking over their shoulders - the feds are coming.
🚚 What else is happening in NFTs?
Here is the list of other notable headlines from the day in NFTs:
Trading volume jumped to nearly 9k ETH on Tuesday; the NFT board was mostly red with Azuki, 0n1 Force and Nakamigos seeing green
An anonymous whale dropped nearly $1M to sweep 24 Bored Apes yesterday, though it wasn't enough to push the floor up (-2% at 23.45 ETH)
Sam Spratt's 1/1 "IX. The Monument Game" saw a 150 ETH bid from Cozomo d'Medici, with 1.5 days left in the auction
NFT Stats reported that 75% of most PFP collection NFTs have not traded yet in 2023, casting a light on both "diamond hands" and the scale of unrealized losses amounted in this sector
Rarible announced it will cease aggregating orders from OpenSea, LooksRare, and X2Y2 by Sept 30 in a major stand for royalty protection
Opepen Set 13 “Eyes Wide Opepen” revealed on Tuesday and opened at a 0.98 ETH floor, while Set 12 has fallen to a 0.79 ETH floor
Artist Vinnie Hager announced his next project "Diary," a generative art open edition project with 100 original drawings spanning 7 visual themes, launching on OpenSea on Sept 7
Mutant Hounds announced a burn event happening today at 12 pm ET called "Phase One of Fusing," with hints of fusion materials coming out of the burn; their floor rallied 28% to 0.14 ETH on the news
Rumble Kong League is partnering with Brazilian game development studio Hermit Crab, to create a more efficient and immersive sports gaming experience
The Doodles Community Council announced the launch of Inkubator Phase 2, featuring commercial experiments and custom proposals for community engagement
Phantom Wallet introduced a new feature making the user authentication process easier and faster called "Sign In With Solana", only requiring a Solana address
🌎 Around Crypto and Web3
A few other Crypto and Web3 headlines that caught my eye:
The crypto market fell slightly on Tuesday; BTC -0.5% at $25,930; ETH -1.3% at $1,640; BTC did fall below its 200-day moving average for first time since Luna collapse
The Base L2 has recorded more daily transactions than Ethereum and other popular L2s Arbitrum and Optimism for the first time in its short history
Mercedes-Benz announced its next NFT collection NXT Icons, a collection of digital re-interpretations of iconic Mercedes designs; there will be 7 Eras with 2,700 NFTs each, and holders of their 1st NFT Maschine get 1 free Mint Pass
The Weeknd is teaming up with Binance to bring his "After Hours Til Dawn" tour to Australia and New Zealand, where they will introduce Souvenir and Tour NFTs for fan engagement
ONE Store, Korea's high-achieving app market, is partnering with Polygon Labs to support web3 games and dApps for its upcoming global launch
🚀 NFT Total Volume
BAYC (1,584 ETH, 23.45 ETH Floor)
DeGods (737 ETH, 3.53 ETH)
MAYC (555 ETH, 4.47 ETH)
Azuki (365 ETH, 3.52 ETH)
Captainz (250 ETH, 3.3 ETH)
📈 NFT Floor Price Increase
Cult (43%, 0.6 ETH Floor)
Mutant Hounds (28%, 0.14 ETH)
Nakamigos (22%, 0.32 ETH)
0n1 Force (8%, 0.64 ETH)
Kaiju Kingz (8%, 0.11 ETH)
🗓 Upcoming NFT Mints and Reveals
Today has drops mostly focused in the art sector along with a new Reddit collection.
Memes, Floor ICONS and Art Blocks are all back with their periodic drops, and photo-artist Guido Disalle is releasing "After Hours" through Money Clicc.
The Reddit Avatar drop may very well be the highlight, with their first F1 collab coming today with Alpine F1 Team and racing-themed avatars.
If you want more, see the full list of today's drops from Swizzy's daily mint monitor.
Memes by 6529 (11:00 a.m. ET)
Guido x Money Clicc "After Hours" (11:00 a.m. ET)
Floor ICONS (12:00 p.m. ET)
Mutant Hounds - Phase One of Fusing (12:00 p.m. ET)
Art Blocks Presents "Mycelia" (1:00 p.m. ET)
Reddit Alpine F1 collection (TBD)
Enjoy this write-up and/or want to sponsor the Morning Minute? Follow along with me on Twitter @tyler_did_it or reach out via email tyler.warner@luckytrader.com.
For all volume and floor price data, see Lucky Trader's Project Rankings page.
For all upcoming mints, see Lucky Trader's NFT Calendar page.