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As his trial begins this week, Nate Chastain, the former head of product at OpenSea, is pushing back on the characterization of the wire fraud and money laundering charges against him as "insider trading."
Dubbed the “First Ever Digital Asset Insider Trading Scheme,” the DOJ alleges Chastain was using confidential information to enrich himself through knowledge about which NFT’s were going to be featured on the marketplace’s homepage. In its indictment, the DOJ said it's seeking to have Chastain forfeit any and all property or proceeds from the sale of NFTs involved in alleged fraud and money laundering. If he's found guilty, each of the charges against him carries a maximum sentence of up to 20 years in prison.
Although Chastain was charged initially with wire fraud and money laundering, prosecutors from the Department of Justice expanded the breadth of their claims, referring to his actions as “insider trading.”
Lawyers defending the former OpenSea employee have been continually fighting over the charges and language used to describe them. They’ve argued that due to the unclear legal framework regarding NFTs and because there’s neither legal precedent nor regulatory clarity about whether these digital assets are securities or commodities, the jury should move to dismiss the lawsuit.
During a pre-trial conference last week, Judge Jesse M. Furman asked Chastain’s attorneys to provide a set of instructions for the jury.
In a letter submitted to Judge Furman on Sunday, April 23, the defense team offered a series of proposals that differ from the prosecution. According to Chastain’s lawyers, their client has not actually been charged with “insider trading” and should not have the charges against him referred to using the term.
"The defense disputes that Mr. Chastain’s conduct can be described as 'insider trading,'" attorney David Miller wrote in the letter. "Whatever understanding you may have about what 'insider trading' may be, you should not concern yourselves with it."
When Chastain was indicted in October 2022, the DOJ specifically charged him with “wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens.” Now, Chastain’s legal team wants the jury to ignore any mention of “insider trading” and focus only on wire fraud and money laundering.
A second set of proposals from his lawyers relates to who has actually been harmed by Chastain’s actions—another contentious topic in the trial.
The DOJ has alleged individual buyers and sellers were unfairly affected by Chastain’s actions and should be included in the court case. According to Chastain’s defense team, the only victim is OpenSea. To that end, his attorneys argued in their letter Sunday that the jury should only hear from the NFT marketplace.
Last week, Furman gave the DOJ the greenlight in a memo to refer to the charges against Chastain as “insider trading.” The case began on Monday.