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DOJ case against ex-OpenSea exec could label NFTs as securities, former SEC lawyer says

DOJ case against ex-OpenSea exec could label NFTs as securities, former SEC lawyer says_629a039d2d160.jpeg

There has been no shortage of conversations surrounding the NFT market after the seemingly quiet industry was elevated to the forefront of the crypto space in the last year as adoption accelerated.

Until now, there hasn’t been any major blowback against the industry, aside from snide comments from people outside of the NFT space declaring there’s no real reason people would pay thousands of dollars in cryptocurrency for a digital image.

But on June 1, all hell broke loose after Nate Chastain, a former executive at the largest NFT marketplace, OpenSea, was arrested and charged “with wire fraud and money laundering in connection with a scheme to commit insider trading in [NFTs],” according to a press release from the U.S. Attorney’s Office for the Southern District of New York, TechCrunch reported.

What’s noteworthy is that the government is calling this “insider trading,” a phrase reserved for the trading of company stocks or other securities by people with access to internal information about the business they work for.

So is this insider trading, or perhaps an attempt to brand NFTs as securities?

That’s not for me to decide (for many reasons — namely that I am not a lawyer). However, the case could determine whether NFTs are indeed securities — and if that label really matters for the future of the digital assets.

Alma Angotti, partner and global legislative and regulatory risk leader at consulting firm Guidehouse, told TechCrunch that it’s possible that NFTs can fit under the umbrella of stocks and securities.

“It could very well be a security under the Howey Test — if you’re buying a piece of an NFT and hoping the price will go up so you make money from it, that’s not very different [from securities].”

Angotti previously served as an enforcement official at the U.S. Securities and Exchange Commission, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network, and the Financial Industry Regulatory Authority. She now leads Guidehouse’s cryptocurrency, digital assets and fintech projects.

“Misappropriating your employer’s confidential information is fraud, and once you move the proceeds of that fraud through the monetary system, it’s money laundering,” Angotti said. “This [charge] is not at all surprising.”

Damian Williams, the U.S. attorney for the Southern District of New York, echoed this in the press release:

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

What do you think?

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Written by yulica

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