In secret from NFT’s next releases, this former head of OpenSea believed he was fooling market players without getting too wet. This was without counting on the FBI and the authorities’ growing expertise in tracking down blockchain criminals.
Game is over. Try again. A former employee of OpenSea, the largest marketplace for NFTs, became a new mascot for the US Department of Justice on Wednesday. As announced by the New York prosecutor’s office responsible for the case, Nathaniel C., 31, ex-product head for the crypto platform, inherited the title of “first defendant for insider trading linked to digital assets”.
Insider trading is a criminal scheme as old as the financial world that consists of using confidential information for personal enrichment. A worn-out scheme that the accused would have updated by applying it to the famously non-perishable tokens. Armed with exclusive commercial information, namely the sale on OpenSea of new NFT collections for which he was responsible, Nathaniel allegedly bought them at a low cost before their release in order to better resell them at a high price.
His machinery would have lasted a few months, from June to September last year. This allowed him to make abnormal profits on about forty NFTs, which were resold at prices two to five times the original price. Nathaniel, who is presumed innocent at this stage of the proceedings, is charged with wire transfer fraud and money laundering, each of whom carries a maximum penalty of 20 years in prison.
† The charges show our commitment to eradicating insider trading – be it in the stock market or the blockchain said prosecutor Damian Williams. To which the deputy director of the FBI in charge of the investigation, Michael J. Driscoll, felt good to add that the authorities will continue” to aggressively persecute players who choose to manipulate the market in this way. †
Anonymous Accounts and Ethereum Addresses
It is that, in the prosecutor’s opinion, the FBI has done “remarkable work.” But the research also relied on the young branch of the ministry dedicated to cryptos, the National Cryptocurrency Enforcement Team† Officially inaugurated in February 2022, the mission of the NCET is to fight against this growing crime that takes advantage of the galloping innovation of digital assets and decentralized technologies.
While the accused is a sad pioneer in the US justice’s hunting board, the present case lacks the eminence of the Bitfinex affair for which authorities had found the equivalent of $3.6 billion in stolen bitcoins. That said, the prosecutor’s indictment is worth looking at. This ten page document shows once again clearly that blockchain cannot be used as a weapon for financial crime. The degree of anonymity that remains imperfect despite immutable traceability.
† To hide the fraud, the accused made his purchases and reselling (from NFT) using anonymous wallets and anonymous accounts on OpenSea The prosecutor Williams underlines, before explaining that these tokens are digital identifiers held on the blockchain, a decentralized registry that records all transactions.
Since most NFTs are built on Ethereum, transfers require Ethereum addresses, a “public unique identifier” on the blockchain like an email address. However, unlike our e-mail boxes, exchanges from one address to another are registered and can be consulted for free. In an effort to further cover the tracks, Nathaniel is also said to have transferred funds to multiple “anonymous” Ethereum addresses, addresses with no history of previous transactions.
Curious about the techno-engineering the police have used to identify the suspect, we will remain dissatisfied, as the court action does not offer sharper details.
By violating the confidentiality clause of his then employer and resorting to various fraudulent tricks to make money, Nathaniel will have to repay all the benefits of this fraud. And if, in the meantime, the defendant has moved or moved the money and property resulting from this financial crime beyond the reach of the court, “the United States intends to seize all property, albeit the defendant” in compensation.
For the record, OpenSea had suspected its former employee and immediately demanded his resignation. † Incredibly disappointed co-founder Devin Finzer had stated that he was taking the necessary steps to regain the trust of the community. † For a new, more open internet that empowers creators and collectors, we need to build trust and transparency in everything we do. “What action.