Former OpenSea product head Nate Chastain has asked a U.S. court to dismiss insider trading charges involving the sale of Non-Fungible Tokens (NFTs) on the popular OpenSea 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.
His attorneys also take note of the NFT transactions in question as having been processed on the Ethereum blockchain. Given the open-source nature and public viewing availability, they 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 Open Sea, 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 there, 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 non-fungible token (NFT) platform, Oval, which he has described as a “personalized platform for collecting NFTs.”
