The Justice Department on Wednesday indicted a former manager of a prominent NFT marketplace on charges related to insider trading.

Nathaniel Chastain, former product manager for NFT marketplace OpenSea, was arrested in New York and charged with one count each of wire fraud and money laundering, the Justice Department announced Wednesday. He was arrested in New York by the FBI.

In an indictment unsealed Wednesday in the Southern District of New York, the Justice Department accused Chastain of using confidential information gained through his job at OpenSea to buy and sell NFTs for a profit.

“NFTs might be new, but this type of criminal scheme is not. As alleged, Nathaniel Chastain betrayed OpenSea by using its confidential business information to make money for himself,” said Damian Williams, U.S. attorney for the Southern District of New York, in a Wednesday statement. 

“Today’s charges demonstrate the commitment of this Office to stamping out insider trading — whether it occurs on the stock market or the blockchain.”

NFTs, or non-fungible tokens, are digital files — often images or art — tracked and verified as unique on a blockchain, the distributed ledger system used to run cryptocurrencies. Purchasing an NFT is intended to be similar to buying a painting, a writers’ original manuscript or the master recordings of a song: While others may have easily accessible copies, the owner of the NFT has the single, unquestionably original version of the product.

NFTs have exploded in popularity over the past two years amid a rush of investor interest and celebrity endorsements of cryptocurrencies and other digital assets. OpenSea emerged as one of the most popular marketplaces for NFTs, and Chastain amassed more than 30,000 followers on Twitter touting the platform’s success and helping users navigate the market.

From June to September 2021, Chastain allegedly used advance knowledge of which NFTs OpenSea would feature on its website to purchase those tokens before they were spotlighted by the platform. He then sold the featured NFTs by OpenSea at anywhere from two from five times the price he paid for the tokens, according to the indictment. Chastain allegedly used anonymous cryptocurrency wallets and exchange accounts to purchase the tokens to avoid detection. 

While NFTs are not strictly financial assets, the tactics allegedly used by Chastain are similar to the basic steps of an insider trading scheme involving stocks, bonds, options or other traditional assets.

It is illegal under federal law to buy or sell a financial asset for financial benefit based on nonpublic information. Insider trading schemes often involve investors buying stocks ahead of planned announcements likely to increase their value or selling stocks of a company on the verge of revealing bad news. 

This content was originally published here.