Blockchain forgets nothing, even when a clever guy tries to enrich himself illegally with NFTs

In secrecy of the upcoming releases of NFT, this former head of OpenSea thought to fool market players without getting too wet. This was without counting on the FBI and the authorities’ growing expertise in tracking down blockchain criminals.

Game-over. Please try again. A former employee of OpenSea, the largest marketplace for NFTs, on Wednesday became a new mascot for the U.S. Department of Justice. As announced by the New York prosecution, which is responsible for the case, Nathaniel C. (31), former product manager for the crypto platform, inherited the title “first indictment for insider trading linked to digital assets”.

Insider trading is a criminal scheme as old as the financial world, which consists of using confidential information for personal enrichment. A run-down 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 ​​new NFT collections for which he was responsible, Nathaniel would have bought them at a low price 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 enabled him to make abnormal profits of about forty NFTs, resold at prices two to five times the original price. Nathaniel, who is presumed innocent at this stage of the trial, faces charges of fraud and money laundering, each with a maximum sentence of 20 years in prison.

The accusations show our commitment to eradicate insider trading – whether it happens on the stock market or on the blockchain said prosecutor Damian Williams. To which the deputy director of the FBI, who is in charge of the investigation, Michael J. Driscoll, felt good about adding that the authorities will continue. ” to aggressively pursue actors who choose to manipulate the market in this way. »

Excerpt from the indictment, USA vs. Nathaniel C. (Southern District of New York)

Anonymous accounts and Ethereum addresses

It is that the US authorities, in the opinion of the prosecutor, have done a “remarkable job”. But the investigation also depended on the young branch of the ministry dedicated to cryptos, the National Cryptocurrency Enforcement Team. NCET’s mission was officially inaugurated in February 2022 and is to combat this growing crime, which benefits from the galloping innovation of digital assets and decentralized technologies.

Although the suspect constitutes a sad pioneer in the hunting justice for American justice, the present case does not have the eminence of the Bitfinex case, which the authorities had found, equivalent to $ 3.6 billion in stolen bitcoins. That said, the indictment issued by the prosecutor is worth seeing. This ten-page document once again clearly demonstrates that the blockchain cannot be used as an economic criminal weapon. The degree of anonymity remains imperfect in light of immutable traceability.

To hide the scam, the accused made his purchases and resale (by NFT) using anonymous wallets and anonymous accounts on OpenSea “, prosecutor Williams emphasizes before explaining that these tokens constitute digital identifiers stored on the blockchain, a decentralized register that inventories all transactions.

nathaniel opensea insider trading accusation nft twt
A hasty departure and the resignation of his position as NFT Product Manager at OpenSea subtly announced … (Twitter)

Nothing a stroke of genius

Since most NFTs are built on Ethereum, transfers require Ethereum addresses, a “public unique identifier” on the blockchain as an email address. However, unlike our e-mail boxes, exchanges from one address to another are registered and can be consulted with free access. In an attempt to cover the tracks further, Nathaniel would also have transferred funds to several “anonymous” Ethereum addresses, addresses with no history of previous transactions.

Curious to discover the techno-technique used by the police to identify the suspect, we will remain dissatisfied because the judicial action does not provide more sharp details.

By violating the confidentiality clause of his employer at the time and resorting to various fraudulent tricks to make money, Nathaniel will have to return all the benefits of this scam. And if the defendant has meanwhile transferred to a third party or moved the money and property as a result of this economic crime out of the reach of the court, “the United States intends to make any confiscation of any property, be it from the defendant” in compensation.

For the record, OpenSea had suspected its former employee and demanded his immediate resignation. “ Incredibly disappointed ”, Co-founder Devin Finzer had stated he would take 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 into everything we do. “What an action.

Leave a Comment