The first NFT related insider trading case.

Nate Chastain has been convicted of fraud and money laundering. He profited from his insider knowledge of which NFTs would be featured on OpenSea.

If the second sentence in that short paragraph might as well be in Greek to your ears, allow me to translate. NFTs are "non-fungible tokens." This means that they are a now-faded financial fad, sort of like the tulips of the cryptocurrency realm. That is all you need to know about the term.

OpenSea is an online marketplace for the trading of NFTs created in 2017. Daily trading volume there hit an impressive record of $2.7 billion on May 1, 2022. But that has dropped 99 percent over the following four months, and it has not recovered since. (As I say, this is a faded fad.)

But OpenSea also contains a blog and newsy features. And there the opportunity for chicanery yawned. Chastain was in a position to know which NFTs would be featured on the newsy portions of the site, and to take a position on those NFTs on the trading portions of the site before they were.

The charge circled about in twitter in September 2021, after that 99% drop in trading volume, that Chastain had in fact engaged in this trading pattern. The remainder of the leadership at OpenSea pressed him for a resignation at that time, and he obliged.

He was arrested and charged in June 2022. Now, almost a year later, he has been convicted.

Now, in my earlier incarnation as a self-conscious anarcho-capitalist, I would have launched into a tirade about how Chastain was an entrepreneur who had been victimized by the regulatory/persecutory State. I won't do that now. I will simply offer the following tentative propositions:

1) This doesn't really seem like insider trading, although it is often called that, and the phrase I've used as the headline of this bog entry is commonly employed in this connection;

2) it seems like a pump-and-dump operation, which ought to be regarded by people with normal moral instincts as, at a minimum, dishonorable.

3) Not everything that is dishonorable ought to be prohibited by the force of law, and perhaps an optimal legal system would not punish Chastain's behavior with that force.

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