Former OpenSea Exec Fights ‘Insider Trading’ Label As DOJ Trial Begins

As his trial begins this week, Nate Chastain, the former chief product officer at OpenSea, is retracting his characterization of the wire fraud and money laundering charges against him as “insider trading.”

Called the “First Ever Digital Asset Insider Trading Scheme,” the DOJ alleges that Chastain used confidential information to enrich himself through knowledge of which NFTs would be displayed on the marketplace’s website. In its indictment, the DOJ said it is seeking to have Chastain forfeit any property or proceeds from the sale of NFTs involved in the alleged fraud and money laundering. If convicted, each of the charges against him carries a maximum sentence of up to 20 years in prison.

Although Chastain was initially charged with wire fraud and money laundering, Justice Department prosecutors broadened their allegations, referring to his actions as “insider trading.”

Lawyers defending the former OpenSea employee have continually fought over the allegations and the language used to describe them. They have argued that because of the unclear legal framework regarding NFTs and because there is neither legal precedent nor regulatory clarity on whether these digital assets are securities or commodities, the jury should move to dismiss the lawsuit.

During a pretrial conference last week, Judge Jesse M. Furman asked Chastain’s lawyers to give a set of instructions to the jury.

In a letter delivered to Judge Furman on Sunday, April 23, the defense team made a number of proposals that differ from the prosecution’s. According to Chastain’s lawyers, their client has not actually been charged with “insider trading” and should not have the charges against him refer to using the term.

“The defense disputes that Mr. Chastain’s conduct can be described as ‘insider trading,'” attorney David Miller wrote in the letter. “Whatever your understanding of what ‘insider trading’ might be, you shouldn’t bother.”

When Chastain was indicted in October 2022, the DOJ specifically charged him with “wire fraud and money laundering in connection with a scheme to commit insider trading in non-fungible tokens.” Now Chastain’s legal team wants the jury to ignore any mention of “insider trading” and focus only on wire fraud and money laundering.

Another set of motions from his attorneys concerns who has actually been harmed by Chastain’s actions — another contentious issue in the lawsuit.

The DOJ has argued that individual buyers and sellers were unfairly affected by Chastain’s actions and should be included in the lawsuit. According to Chastain’s defense team, the only victim is OpenSea. To that end, his lawyers argued in their letter Sunday that the jury should only hear from the NFT market.

Last week, Furman gave the DOJ the green light in a memo to refer to the allegations against Chastain as “insider trading.” The case started on Monday.