Nathaniel Chastain, a former executive at OpenSea, who was convicted in May of fraud and money laundering related to insider trading of NFT collections, is seeking to overturn his conviction. Chastain’s legal team has approached the United States Court of Appeals for the Second Circuit, arguing that the conviction improperly treated information about NFTs as “property.”
In a recent brief, Chastain’s attorneys contended that the insider information he used for trading NFTs, specifically choosing collections for OpenSea’s homepage, was not inherently valuable to OpenSea and should not be considered the company’s “property.” The brief stated, “The sole prosecution theory was that Chastain defrauded OpenSea by using its information for personal benefit. Thus, to sustain a wire fraud conviction, the government had to prove that the purported ‘object’ of his scheme—the information at issue—was OpenSea’s ‘property.'”
During his tenure at OpenSea, Chastain reportedly purchased NFTs that he later featured on the platform’s homepage. Once these collections gained exposure and sold out, he profited by selling the NFTs amid the heightened demand. The scheme allegedly resulted in Chastain earning over $50,000.
Chastain’s legal team does not dispute the questionable nature of his actions or his use of privileged information. However, they argue that the information he exploited was not the property of OpenSea, as his manipulation did not incur a cost to the company. The attorneys referenced a 2023 Supreme Court decision that, according to them, clarified federal wire fraud laws to only prohibit schemes designed to obtain things “long… recognized as property.”
Despite OpenSea terminating Chastain’s employment immediately after on-chain investigators revealed his conduct in 2021, he faced legal consequences in August, receiving a three-month prison sentence, three months of house arrest, three years of probation, and a $50,000 fine. Prosecutors touted the case as the first-ever digital asset insider trading scheme.
Chastain’s legal team, in their recent filing, contested the characterization of the case, quoting the original judge’s doubts and stating that the charges might not have been filed if it were not in the “sexy, new arena” of NFTs.
