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The recent OpenSea insider trading lawsuit underscores the need for companies in the digital asset industry to keep abreast of the rapidly changing legal landscape surrounding the industry, and also emphasizes the need for new digital assets to comply with the same historic regulations and laws. The government insists that this case is an example of old behavior in a new field.
“NFTs may be new, but this type of criminal plot is not,” said Damien Williams, U.S. Attorney for the Southern District of New York, in a press release.
OpenSea employee Nathaniel Chastain has been charged with fraud and money laundering for profiting from insider knowledge of NFTs sold on the OpenSea platform. He is considered the first insider trading case involving digital assets.
Founded in 2017, OpenSea is the first and largest digital marketplace for cryptocurrency collectibles and non-fungible tokens with a market value of $13 billion. Chastain was responsible for selecting the products to sell. According to the indictment, Chastain said he bought 45 of his NFTs before they were featured and sold them for a profit after they were on display at OpenSea, earning him 5 from twice their original purchase price. We were able to collect doubles.
OpenSea apology
OpenSea issued a statement and apology, making clear intentions to investigate and take steps to implement internal controls where necessary.
“We owe this growth to a vibrant community of creators and collectors who use our platform every day. We have a strong obligation.The actions of one of our employees violated that obligation and yesterday we requested and accepted his resignation,” the company said in an online blog.
“We do not take this action lightly. When we learned of this action, we immediately asked a third party to conduct a thorough investigation of the incident and made suggestions on how to strengthen existing controls. That investigation is underway, we are committed to implementing its recommendations promptly.”
Defense: NFTs are not securities or commodities
Perhaps unsurprisingly, Chastain’s attorneys want the charges dismissed, arguing that because NFTs are neither securities nor commodities, they are not subject to insider trading laws. Interestingly, Chastain has some outside help. The New York Council of Defense Lawyers (NYCDL), a non-profit organization of hundreds of criminal defense attorneys focused on New York federal courts, amicus briefsarguing in favor of the dismissal on the grounds that the prosecution went too far and sought to broaden the scope of the mail and wire fraud charges. Defining Chastain’s actions as fraud, arguing that they do not constitute the “property” of OpenSea and therefore deprive OpenSea of property or profits, is fraudulent.
At the very least, Chastain’s case is a clear indication that companies operating in this space face greater scrutiny and regulation. Harris Beach attorneys spend much of their time monitoring the legal and regulatory landscape, providing guidance and devising strategies for compliance in many areas.please review some service We serve companies in the blockchain and digital asset industry as well as the financial industry.
The content of this article is intended to provide a general guide on the subject. You should seek professional advice for your particular situation.
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