Lawyers: NFT insider trading case not a crime
The New York Council of Defense Lawyers (NYCDL) argues that federal prosecutors are overstating the case of a former Open Sea employee accused of conducting an insider trading scheme involving non-fungible tokens (NFTs).
Nathaniel Chastain was charged in May with money laundering after the US Department of Justice (DOJ) said he used anonymous accounts on Open Sea to mask his identity. His alleged activities were discovered by the NFT community, which traced his transfers and funds back to his public account.
Read more: DOJ charges former OpenSea employee in NFT insider trading scheme
But as The Wall Street Journal reported Wednesday (Aug. 31), the NYCDL — an industry advocacy group — says prosecutors have taken a workplace misconduct case and turned it into a felony, and are asking a judge to dismiss the case.
The DOJ claims Chastain broke the law by stealing confidential information from his former employer, although he was also charged with money laundering.
Allowing the case to proceed could “massively expand wire fraud to capture all kinds of workplace indiscretions” that might not even get an employee in trouble, let alone prosecuted, the NYCDL said.
The group argues that if prosecutors prevail in their case against Chastain, it could open the door to future criminal actions against employees who use work information elsewhere, such as a whistleblower who reveals company information to a reporter.
See also: Academic Study Finds Evidence of Insider Trading at Crypto Exchange Coinbase Global
This summer, the DOJ has also been charged with what it says is the first-ever case of insider trading involving cryptocurrency, involving a former manager of Coinbase and two other men who were charged with wire fraud conspiracy and wire fraud.
Weeks later, a study by the University of Technology Sydney found that insider trading at Coinbase could be more widespread, saying research estimated that between 10% and 25% of Coinbase listings since 2018 showed signs of insider trading.
Coinbase responded that it takes allegations of front-running seriously and works hard to ensure that all market participants have the same information.
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