Nate Chastain — In 2022, the prominent NFT marketplace OpenSea was dealing with a slew of problems, including claims of insider trading originating from suspicious NFT trades.
Former OpenSea product manager Nate Chastain was charged with wire fraud and money laundering.
He most likely purchased hundreds of NFTs before they were available on the OpenSea website.
Michael J. Driscoll, Assistant Director-in-Charge of the FBI, issued the following remark in 2022:
“With the emergence of any new investment tool, such as blockchain supported non-fungible tokens, there are those who will exploit vulnerabilities for their own gain.”
“The FBI will continue to aggressively pursue actors who choose to manipulate the market in any way.”
Nate Chastain’s trial began this week, when the former product director defended himself against “insider trading” claims.
The charges
Insider trading is the unlawful purchase or selling of stocks based on non-public information not available to the general public, providing insiders an unfair edge over other investors.
The allegations have been labeled the “First Ever Digital Asset Insider Trading Scheme.”
According to the Department of Justice, Nate Chastain utilized private information to his advantage by learning about the NFTs that will be released on OpenSea’s webpage.
The DOJ stated in the indictment that it intended to have Chastain forfeit all property and revenues resulting from the alleged fraud and money laundering NFT activities.
If convicted, Chastain could face more than 20 years in jail for each of the charges levied against him.
Nate Chastain was first charged with wire fraud and money laundering, but prosecutors with the DOJ upgraded their accusations to include “insider trading.”
Defense
Nate Chastain’s attorneys have fought the claims and the terminology used to characterize them with tenacity.
They contended that the action should be dismissed due to the ambiguous legal environment surrounding NFTs, as well as a lack of legal precedent or regulatory certainty about their position as securities or commodities.
“As alleged, acting with purported criminal intent, Mr. Chastain exploited his advanced knowledge of which NFTs would be featured on OpenSea’s homepage by purchasing certain NFTs before they were featured and selling them at a profit after they were featured,” their 2022 filing said.
“The rub, however, is that the NFTs are neither securities nor commodities.”
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The marketplace
OpenSea is a decentralized marketplace for buying, selling, and discovering non-fungible tokens (NFTs) and other digital assets.
It enables users to create, list, and trade NFTs representing a wide range of digital assets, including art, music, domain names, virtual real estate, and others.
OpenSea uses the Ethereum blockchain to enable users to transact without the use of middlemen or centralized authority.
It also offers a wide range of tools and services to NFT creators and purchasers, such as configurable smart contracts, analytics, and vast search capabilities.
In the NFT arena, OpenSea has grown in popularity, bringing hundreds of producers and collectors to its platform.
Proposals
Judge Jesse M. Furman requested that Nate Chastain’s attorneys prepare a set of jury instructions during a pre-trial hearing last week.
On Sunday, April 23, the defense team sent the judge a letter with various viewpoints that differed from the prosecution’s.
According to Chastain’s attorneys, he has not been charged with “insider trading,” hence the charges should not use that word.
“The defense disputes that Mr. Chastain’s conduct can be described as ‘insider trading,'” attorney David Miller wrote.
“Whatever understanding you may have about what ‘insider trading’ may be, you should not concern yourselves with it.”
Judge Jesse M. Furman requested that Nate Chastain’s attorneys prepare a set of jury instructions during a pre-trial hearing last week.
On Sunday, April 23, the defense team sent the judge a letter with various viewpoints that differed from the prosecution’s.
According to Chastain’s attorneys, he has not been charged with “insider trading,” hence the charges should not use that word.
Second proposals
The second set of recommendations from Nate Chastain’s counsel concerns people who were damaged by his activities, which is a contentious subject in the trial.
According to the DOJ, individual consumers were affected as a consequence of Chastain’s acts, and they were asked to join in the court case.
In contrast, Chastain’s defense team argued that OpenSea was the single victim.
In their letter, they argued that the jury should only hear from the NFT marketplace.
Last Monday, Judge Furman granted the Department of Justice authority to refer to Nate Chastain’s charges as “insider trading.”
