Nate Chastain, the former product head at non-fungible token (NFT) marketplace OpenSea, has asked a U.S. court to dismiss insider trading charges involving the sale of NFTs on the popular platform, according to a motion filed early Monday.
Filed in the United States District Court for the Southern District of New York, the motion argued that NFTs cannot be classified as securities or commodities, a requirement for wire fraud charges.
“In any prosecution under a Carpenter wire fraud theory of insider trading, the existence of securities or commodities trading remains an essential element of the offense,” wrote lawyers for Chastain, referring to Carpenter v. United States, a 2018 ruling by the U.S. Supreme Court.
His attorneys also said the NFT transactions in question were processed on the Ethereum blockchain. Given the blockchain's open-source nature and public viewing availability, the lawyers argued, the transactions could not have been used for money laundering.
The Department of Justice (DOJ) in June indicted Nathaniel Chastain on charges of participating in wire fraud and money laundering involving NFTs sold on OpenSea, the internet’s largest NFT marketplace. The charges alleged Chastain defrauded OpenSea by using his knowledge of which NFTs were scheduled to be presented on the platform’s homepage to purchase the assets before they appeared, and then sell them later at a profit.
The DOJ has called Chastain’s activities the “first-ever digital asset insider trading scheme.”
Chastain resigned from OpenSea in September 2021. He has since begun working on a new NFT platform, Oval, which he has described as a “personalized platform for collecting NFTs.”
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