Well, that’s the point of these cases. This guy is (unfortunately for him) being made an example of, with a potentially very harsh sentence, in order to scare away the other 999. The next guy in his shoes will think twice.
The next guy will put his shoes in a country without an extradition treaty and not even think once. And honestly I don't even blame the scammers. Anyone stupid enough to buy an NFT deserves to get scammed.
You are just ranting about things irrelevant to this story.
Nate is not a scammer, but was a product manager at a very successful A16Z-backed startup. He is the type of guy that was already going to be successful and wealthy, but decided to make a little more after incorrectly assuming that either (x) what he was doing wasn't illegal since he wasn't trading stocks or (y) the government wasn't looking into this type of thing. The DOJ is now disincentivizing others in his shoes from following the same path. This type of person was never going to move to a random country without extradition to straight up scam people.[0]
Your comment is akin to someone saying it's a waste of time to charge a US F500 employee or hedge fund employee with insider trading since a true scammer would just be sending phishing emails from Russia. They are different types of crimes and criminals, and I think for this type of crime/criminal, there is a deterrence effect to these cases.
And regardless of your view on NFTs, nobody was scammed here, he just front-ran to make a profit and used confidential information of his employer to do that. This is akin to a production intern for Jim Cramer buying stocks that he knows Jim will talk about on his show that evening, to profit from any short-term pump from the exposure.
[0] I don't actually know Nate or any of the details here, so I am assuming, but this is the sense I get from following this drama on Twitter.
"This is akin to a production intern for Jim Cramer buying stocks that he knows Jim will talk about on his show that evening, to profit from any short-term pump from the exposure."
Is that actually insider trading?really not sure...
IANAL but probably. The intern is trading on (possibly) material non-public information. Now, if the intern is just making a small purchase, they may well get away with it. But trading on things like inside financial information, an M&A, major partnership, etc. before they're made public (I think the language one sees is actually before the public has had time to absorb the information) is pretty much the definition of insider trading.
I don't know if Cramer actually does move markets or not. I guess the defense would be that Cramer is just some clown with a finance show and no one takes him seriously. It's just entertainment.
> There are studies depicting the market’s reaction to recommendations made on Cramer’s show. Notably, in January 2009, graduate students from the University of Pennsylvania published a study claiming that over time, the average next-day increase for a stock that Cramer recommended was 3% for the entire study sample, and almost 7% for smaller cap stocks. They proved through the use of electronic communication networks (ECN) that most trades came in after 7 p.m. ET, when "Mad Money" concluded.
> Another study conducted by Northwestern University, titled "Is the Market Mad?: Evidence from 'Mad Money'" and published in 2006, showed that the average cumulative return on Cramer’s recommendation was 5.19%, but, more important, almost all the increases were nullified within 12 days.
> Cramer recommends stocks with momentum, both positive and negative. His recommendations affect the price, with the impact reversing quickly, consistent with pricing pressure caused by viewers' jumping on Cramer's recommendations. Cramer's sell recommendations also affect prices, though the impact does not quickly reverse.
While I'm no securities attorney, I can assure you that it is most assuredly insider trading.
The key words are "material non-public information".
IF it is information and IF that information might make a material difference, it could be subject to insider trading.
IF that material information is time-sensitive, and it is not yet available to the general public, then I can assure you that it is subject to insider trading rules (as Nathaniel Chastain is now discovering to his detriment).
If such were not the case, then there would be queues of people wanting to work for free as interns at every financial wire service.
I can also report that a family member has worked at some major law firms (which do work for major corps & individuals), and they, and their family are specifically forbidden from trading in individual stocks without specific advance permission for each trade. This is to both avoid even the appearance of impropriety, and also just so everyone knows that if you break the rule and it ever comes up as a problem, you'll be fired in a New York Second [1].
[1] New York Second = the amount of time between the time a light turns green and the driver behind you hits the horn if you aren't already moving - considerably shorter than the standard International Atomic Time second.
It was beyond reckless on Nate's part. He was a darling in the space, had a punk prior to this side hustle, and just blew himself up - not in a good way.
>The DOJ is now disincentivizing others in his shoes from following the same path.
Extreme counter example: How's the death penalty working to disincentivize murder? How has any other example worked? People are still commiting these crimes even while people are getting caught and going to jail when the DOJ decides to do something.
For those that are criminals, these laws are just part of the game. Keeping the odd person that might think about it when in desperate situations are not the ones commiting the mass amount of these crimes. We're focused on the wrong people.
There you go. This is why committing insider NFT trading using a public blockchain where the transactions are traceable where the authorities can use that and the transactions all end up being connected to this employee (even though they tried using multiple wallets) is quite futile and eventually they can be traced all up.
Goes to show that such blockchains like Bitcoin, Ethereum, etc are NOT anonymous and never intended it to be as such in their white-papers. So it's quite disingenuous for anyone to keep suggesting that they are 'anonymous' whether or not if they are skeptic, supporter or neither.
What you are looking for is privacy coins like Monero, Mobilecoin, Zcash or Grin that specifically aim for privacy guarantees which are used to hide wallet balances and transaction details. But the regulators are going to crackdown on privacy ones anyway by making it harder to trade them for fiat via exchanges.
No, this guy was just dumb enough to buy the NFTs mere minutes before they were listed. That's blatantly obvious insider trading. If he had not been so obvious and maybe better laundered his money through e.g. Tornado Cash then he would've gotten away with it.
I agree.
Adding to a point about privacy coins - zk-SNARKS or zk-STARKS can be implemented on Ethereum via L2 rollups for those who need privacy/non-traceability. But probably not on a base layer.
Monero can't do smart contracts as far as I know. However there is somewhat of a push to adopt privacy focused zero knowledge rollups, which would preserve privacy while settling on a layer 2: https://aztec.network/
The crypto community did the research / job for the FBI here.