In the secrecy of upcoming NFT releases, this former OpenSea boss believed he was fooling market players without getting too wet. This is without relying on the growing experience of the FBI and the authorities in tracking blockchain criminals.
Game over. Try again. A former employee of OpenSea, NFT’s largest marketplace, became a new mascot for the US Department of Justice on Wednesday. As announced by the New York prosecutor in charge of the case, Nathaniel C. (31), former head of product for the crypto platform, has inherited the title of “first defendant for insider trading related to digital assets”.
Insider trading is a criminal scheme as old as the financial world, consisting in the use of confidential information for personal enrichment. A worn-out scheme that the accused would have actualized by applying it to the famous non-fungible tokens. Armed with exclusive commercial information, namely the sale on OpenSea of the new NFT collections for which he was responsible, Nathaniel would have bought them at low cost before their release, to resell them better at a high price.
Its machinery would last a few months, from June to September last year. This allowed him to earn abnormal profits on some forty NFTs, which were resold at prices two to five times the initial price. Alleged innocent at this stage of the proceedings, Nathaniel is charged with computer fraud and money laundering, each of which carries a maximum sentence of 20 years in prison.
” The allegations demonstrate our commitment to eradicating insider trading, regardless of whether it happens in the stock market or the blockchain prosecutor Damian Williams said. To which the FBI deputy director in charge of the investigation, Michael J. Driscoll, felt good to add that the authorities will continue. aggressively pursuing players who choose to manipulate the market in this way. “
Anonymous accounts and Ethereum addresses
It’s just that, according to the prosecutor, the feds have done “remarkable work.” But the investigation was also entrusted to the young branch of the ministry dedicated to cryptocurrencies, the National team for the application of cryptocurrencies. Officially inaugurated in February 2022, NCET’s mission is to fight this growing crime that benefits from runaway innovation in digital assets and decentralized technologies.
Although the suspicion constitutes a sad pioneer in the hunting council of American justice, the present case does not have the eminence of the Bitfinex affair for which the authorities had found the equivalent of 3.6 billion dollars in stolen bitcoins. That said, it is worth seeing the indictment issued by the prosecutor. This ten-page document clearly demonstrates once again that blockchain cannot be used as a weapon of financial crime. The degree of anonymity that remains imperfect in the face of immutable traceability.
” To conceal the fraud, the defendant made his (NFT) purchases and resales using anonymous wallets and anonymous accounts on OpenSea “, Underlines the pm Williams, before explaining that these tokens constitute digital identifiers kept on the blockchain, a decentralized ledger that inventories all transactions.
Nothing of a stroke of genius
Since most NFTs are based on Ethereum, transfers require Ethereum addresses, a “public unique identifier” on the blockchain such as an email address. But unlike our mailboxes, exchanges from one address to another are registered and can be consulted with free access. In an effort to cover the traces further, Nathaniel also allegedly transferred funds to multiple “anonymous” Ethereum addresses – addresses with no previous transaction history.
Curious to discover the techno engineering that the police used to identify the suspect, we will be dissatisfied, because the court document does not offer clearer details.
By violating his employer’s confidentiality clause at the time and resorting to various fraudulent tricks to earn money, Nathaniel will have to return all the benefits he has gained from this fraud. And if, in the meantime, the accused has assigned to third parties or moved the money and assets resulting from that financial crime beyond the court’s reach, “the United States intends to proceed with any confiscation of whatever property be it the accused.” in return.
For the record, OpenSea had suspected his former employee and immediately called for his resignation. “ Incredibly disappointed “, Co-founder Devin Finzer said 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 will need to build trust and transparency in everything we do. “What an act.