3 ms·

Claims he is charged with insider trading but he's actually being charged with money laundering and wire fraud. There are no laws on the books against insider t

Claims he is charged with insider trading but he's actually being charged with money laundering and wire fraud. There are no laws on the books against insider trading NFTs. Even the closest physical counterpart, art auctions, collectibles, etc have no such laws against using insider info to personal advantage. The charges in this case, seem egregious?

ABeeSea 4y ago
Seems that he defrauded his employer and employer’s customers. The original NFT owner should have gotten the profit from the front page listing. A physical analog would be an art rep for Sotheby’s directly buying a piece from a perspective seller and then auctioning the piece themselves through Sotheby’s through a third party to hide it from their employer.
- chrisco255 4y ago
  If he was buying these NFTs they were already for sale on the open market. Most of these NFT sales are not auctions but direct, "buy it now" listings. A physical analog would be someone buying an obscure comic book series or packs of Yu-Gi-Oh cards before they got featured by a national expo or collectible marketplace. And then flipping them for a higher price after the hype train started.
  - twox2 4y ago
    Is this a crime if you know ahead of time it's going to be listed?
    - chrisco255 4y ago
      No, and he's not being charged with "insider trading" (because it doesn't exist for art / collectibles). Typically any item that hits the OpenSea front page has already been listed (usually days or weeks later). The listing of the most popular NFTs occurs when their custom smart contract goes live on-chain, and is usually accompanied with a custom "mint" website. OpenSea automatically lists any ERC721 that gets created (although will sometimes manually de-list projects for copyright violations or other issues). He definitely took advantage of privileged information. He definitely should have been fired and fined. But these are not securities. NFT art drops do not have "earnings calls" and quarterly reports or anything of the sort. He was front running the boost in sales activity that occurs when a project gets featured on the front page of OpenSea.io. That's the extent of it.
colechristensen 4y ago
Money laundering is illegal itself without requiring other illegal activity at all, the act of hiding sources and destinations is itself against the law. Likewise wire fraud. And NFTs are securities, or at least this is the argument. The laws barring insider trading apply to securities in general, individual types of securities need not be enumerated in each law. Collectables are not securities, they are the actual thing and thus not covered.
- teraflop 4y ago
  In this case, the money-laundering statute with which Chastain is being charged -- 18 USC 1956(a)(1)(B)(i) -- does require that the transaction was originally "designed in whole or in part" for a purpose that is itself illegal, namely the wire fraud. The wire fraud indictment, in turn, seems to hinge on the allegations that Chastain used "false and fraudulent pretenses, representations and promises" (namely, using anonymous accounts to flip the NFTs) and acted "in violation of the duties he owed to OpenSea" (namely, by using OpenSea's confidential data for personal gain, contrary to an agreement he signed).
  - colechristensen 4y ago
    I’m under the impression that as an employee also you don’t have to sign a specific agreement not to use company insider information for personal gain, but having signed that agreement strengthens the case that the accused knew what he was doing was illegal.
    - encryptluks2 4y ago
      Since when did violating an employment agreement become a criminal issue? Next thing you know they'll be charging people for switching employers.
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ABeeSea 4y ago

Seems that he defrauded his employer and employer’s customers. The original NFT owner should have gotten the profit from the front page listing. A physical analog would be an art rep for Sotheby’s directly buying a piece from a perspective seller and then auctioning the piece themselves through Sotheby’s through a third party to hide it from their employer.

chrisco255 4y ago
If he was buying these NFTs they were already for sale on the open market. Most of these NFT sales are not auctions but direct, "buy it now" listings. A physical analog would be someone buying an obscure comic book series or packs of Yu-Gi-Oh cards before they got featured by a national expo or collectible marketplace. And then flipping them for a higher price after the hype train started.
- twox2 4y ago
  Is this a crime if you know ahead of time it's going to be listed?
  - chrisco255 4y ago
    No, and he's not being charged with "insider trading" (because it doesn't exist for art / collectibles). Typically any item that hits the OpenSea front page has already been listed (usually days or weeks later). The listing of the most popular NFTs occurs when their custom smart contract goes live on-chain, and is usually accompanied with a custom "mint" website. OpenSea automatically lists any ERC721 that gets created (although will sometimes manually de-list projects for copyright violations or other issues). He definitely took advantage of privileged information. He definitely should have been fired and fined. But these are not securities. NFT art drops do not have "earnings calls" and quarterly reports or anything of the sort. He was front running the boost in sales activity that occurs when a project gets featured on the front page of OpenSea.io. That's the extent of it.

colechristensen 4y ago

Money laundering is illegal itself without requiring other illegal activity at all, the act of hiding sources and destinations is itself against the law. Likewise wire fraud. And NFTs are securities, or at least this is the argument. The laws barring insider trading apply to securities in general, individual types of securities need not be enumerated in each law. Collectables are not securities, they are the actual thing and thus not covered.

teraflop 4y ago
In this case, the money-laundering statute with which Chastain is being charged -- 18 USC 1956(a)(1)(B)(i) -- does require that the transaction was originally "designed in whole or in part" for a purpose that is itself illegal, namely the wire fraud. The wire fraud indictment, in turn, seems to hinge on the allegations that Chastain used "false and fraudulent pretenses, representations and promises" (namely, using anonymous accounts to flip the NFTs) and acted "in violation of the duties he owed to OpenSea" (namely, by using OpenSea's confidential data for personal gain, contrary to an agreement he signed).
- colechristensen 4y ago
  I’m under the impression that as an employee also you don’t have to sign a specific agreement not to use company insider information for personal gain, but having signed that agreement strengthens the case that the accused knew what he was doing was illegal.
  - encryptluks2 4y ago
    Since when did violating an employment agreement become a criminal issue? Next thing you know they'll be charging people for switching employers.
    - deleted 4y ago
      [deleted]
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