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Former OpenSea Executive’s NFT Trading Was Not Illegal, but May Provoke Regulatory Changes

Loeb & Loeb Advanced Media and Technology partner Mercedes Tunstall is quoted in an article published by The Block discussing the resignation of Nate Chastain, the former head of product at OpenSea, after it was recently discovered that Chastain used secret Ethereum wallets to purchase NFT drops before they appeared on OpenSea’s front webpage. According to the article, there is some uncertainty among legal and regulatory sources as to whether or not Chastain’s actions are against the law.

Mercedes told The Block that if Chastain’s activity was tied to securities, it would most likely constitute insider trading. “I’ve looked at this pretty carefully,” she said, “and if NFTs were securities then this activity would most likely, but not absolutely, could be deemed to constituent shadow trading or insider trading.”

Mercedes believes that down the road, the market could see proposed legislation aimed at defining crypto companies and NFT marketplaces as financial services firms. That could require them to subscribe to some of the same money laundering, anti-corruption and conflict of interest rules that banks and other firms are required to follow. 

"Best practices in corporate America is to have a conflict of interest policy to manage executive team conduct," Mercedes noted.

Click here to read the article on The Block’s website (subscription required).