In May 2023, a jury convicted Nathaniel Chastain of wire fraud and money laundering related to his knowledge of which NFTs would be featured on the OpenSea website.
Nathaniel Chastain, a former product manager of nonfungible token (NFT) marketplace OpenSea, has appealed his conviction for wire fraud and money laundering related to insider trading.
In a Jan. 16 filing in the United States Court of Appeals for the Second Circuit, Chastain’s legal team claimed the former product manager was entitled to an acquittal because the U.S. government failed to prove that information related to NFTs on OpenSea qualified as property. According to his lawyers, the information he used to profit off NFTs featured on the OpenSea website “had no commercial value” to the platform and was not considered “protected property.”
“Not all confidential information is property,” said the appellate brief. “[C]onfidential information must have commercial value to its owner […] The company’s business model was to earn revenue from commissions on NFT transactions conducted on its website, not to monetize Chastain’s ideas about which NFTs to feature.”
The filing added:
“OpenSea made money from Chastain’s trading, because it earned commissions when he used its platform to buy and sell the featured NFTs.”
During his 2023 trial in U.S. District Court for the Southern District of New York, prosecutors presented evidence that Chastain had the authority to choose which NFTs would be featured on the OpenSea website. He purchased 45 NFTs before they were featured and then resold them for Ether (ETH).
In May 2023, Chastain was convicted of wire fraud and money laundering. He was later sentenced to three months in prison and a $50,000 fine, with a judge allowing him to wait until Nov. 2 to surrender himself to authorities. The appellate filing requested that Chastain’s conviction be reversed or vacated in place of a new trial.