OpenSea 'insider trading' trial kicked off in New York district court
On Apr. 24 the Southern district court of New York held the first jury hearing on the case against former OpenSea product manager Nathaniel Chastain, who’s being accused of insider trading with nonfungible tokens (NFTs).
The allegations were filed by the U.S. Manhattan Attorney's Office on May 31, 2022. Chastain is being indicted on two counts — wire fraud and money laundering. On the first count, the former employee of the largest NFT market presumably used his insider knowledge to secretly buy 45 NFTs shortly before their listing to sell them with a profit immediately afterward.
The filing cites several examples of misconduct, such as the case with NFT "The Brawl 2." In August 2021, through anonymous accounts, Chastain allegedly bought four of them “minutes before” they got featured on OpenSea and sold them within hours with 100%-profit.
In October 2022, Chastain’s defenders unsuccessfully filed a motion to remove “insider trading” references from his charges. Chastain argued the use of “insider trading” to describe his alleged actions is “inflammatory,” as “insider trading” only applies to securities and not to NFTs. Prosecutors responded, noting that the allegation of “insider trading” can be used to reference multiple types of fraud in which someone with non-public knowledge uses it to trade assets.
Related: SEC reaches ‘agreement in principle’ to resolve insider trading case of Coinbase product manager
As the term “insider trading” had previously not been used in reference to cryptocurrencies or NFTs before Chastain’s charges, the outcome of the trial, which is expected to last several weeks, might have a major influence on the legal classification of NFTs.
In 2022, former U.S. Securities and Exchange
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