On June 1, 2022, the Department of Justice announced its first criminal indictment for insider trading of nonfungible tokens, or NFTs. The case opens yet another front in the Government’s efforts to police the burgeoning marketplace for digital assets and NFTs.

According to the indictment, the defendant—a former product manager at a prominent NFT marketplace—allegedly used confidential information obtained during the course of his employment regarding which NFTs were to be featured on the marketplace’s homepage to purchase several of those NFTs before they were featured to the public. He allegedly concealed his efforts using various artifices, including routing transactions through anonymous digital wallets and anonymous accounts on his former employer’s marketplace. After the NFTs were featured, the defendant allegedly sold his NFTs at a profit.

Interestingly, the Government did not charge the defendant with violating traditional securities or commodities fraud statutes, and instead charged him with one count of wire fraud and one count of money laundering. But the indictment refers to the defendant’s “misappropriation” of his employer’s proprietary information, harkening to one of the primary theories of insider trading under the federal securities laws. As part of the announcement, US Attorney Damian Williams noted, “NFTs might be new, but this type of criminal scheme is not. . . . Today’s charges demonstrate the commitment of this Office to stamping out insider trading—whether it occurs on the stock market or the blockchain.”