A non-fungible token (NFT) displayed on the website of NFT marketplace OpenSea is seen through a magnifying glass, in this illustration picture taken February 28, 2022.
A non-fungible token (NFT) displayed on the website of NFT marketplace OpenSea is seen through a magnifying glass, in this illustration picture taken February 28, 2022. Reuters / FLORENCE LO

U.S. prosecutors in Manhattan on Wednesday charged a former product manager at OpenSea, the largest online marketplace for non-fungible tokens, with insider trading, the first such case involving digital assets.

Nathaniel Chastain, 31, of Manhattan, was accused of secretly buying 45 NFTs on 11 separate occasions based on confidential information that the tokens, or others by the same creator, would soon be featured on OpenSea's home page.

Prosecutors said Chastain chose which NFTs to feature, and sold his NFTs shortly after they were featured, typically for two to five times what he paid.

In one instance, Chastain allegedly more than quadrupled his money by purchasing the NFT "Spectrum of a Ramenfication Theory" on Sept. 14, 2021, and selling it early the next morning.

Prosecutors said the scheme ran from June to September 2021, with Chastain transacting through anonymous digital currency wallets and accounts at OpenSea, also known as Ozone Networks Inc.

"NFTs might be new, but this type of criminal scheme is not," U.S. Attorney Damian Williams in Manhattan said in a 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."

Chastain pleaded not guilty on Wednesday to wire fraud and money laundering charges, each carrying a maximum 20-year prison term, before U.S. Magistrate Judge Barbara Moses in Manhattan. Bond was set at $100,000.

"When all the facts are known, we are confident he will be exonerated," Chastain's lawyer David Miller said in an email.

Non-fungible tokens are unique digital assets, reflecting ownership of files such as artwork, other images, videos and text, and recorded on a blockchain.

The NFT market totaled about $40 billion in 2021, and more than $37 billion from January to April 2022 though transaction activity has been stabilizing, according to the blockchain data firm Chainalysis Inc.

"When we learned of Nate's behavior, we initiated an investigation and ultimately asked him to leave the company," OpenSea said in a statement about Chastain. "His behavior was in violation of our employee policies and in direct conflict with our core values and principles."