Nathaniel Chastain, the ex-OpenSea executive who was convicted last May of fraud and money laundering after profiting off several NFT collections he chose to highlight on the marketplace’s homepage, has asked a federal appeals court to overturn his conviction on the grounds that it improperly designated information about NFTs as “property.”
In a brief filed this week in the United States Court of Appeals for the Second Circuit, Chastain’s attorneys attempted to make the argument that the insider information Chastain used to his advantage in trading NFTs—namely, which NFT collections he planned to feature on OpenSea’s homepage—was not of particular value to OpenSea, and therefore not the company’s property.
“The sole prosecution theory was that Chastain defrauded OpenSea by using its information for personal benefit,” attorneys for Chastain argued in the brief. “Thus, to sustain a wire fraud conviction, the government had to prove that the purported ‘object’ of his scheme—the information at issue—was OpenSea's ‘property.’”
In his time at OpenSea, Chastain routinely bought up NFTs that he would then feature on OpenSea’s homepage; once the collections sold out due to that exposure, he would then sell the NFTs to collect a profit amid the hype. All in all, Chastain netted over $50,000 by employing such schemes.
Ex-OpenSea Exec Receives 3-Month Sentence in NFT Insider Trading Case
OpenSea’s former head of product was sentenced to three months in prison on Tuesday for using inside knowledge at the NFT marketplace to flip assets featured on its homepage. Nathaniel Chastain, who was once responsible for deciding which NFTs would be given a prominent spot on OpenSea as part of his job, was convicted of fraud and money laundering in May. He potentially faced up to 20 years in prison for each charge. The FBI and U.S. Department of Justice (DOJ) accused Chastain of illegally mak...
Chastain’s attorneys do not dispute that the executive engaged in such activity, nor do they claim it to be an admirable use of the information he had at his disposal.
“There was evidence suggesting Chastain may have believed his conduct was unethical or a conflict of interest,” Chastain’s attorneys wrote.
But—and critically, say the attorneys—the information that Chastain used to enrich himself was not “property” of OpenSea, in the sense that Chastain’s manipulation of that information did not come at a cost to the company. That distinction matters because, according to them, a 2023 Supreme Court decision clarified that federal wire fraud laws only prohibit schemes designed to obtain things “long… recognized as property.”
The Rise and Fall of GameStop's NFT Marketplace
GameStop has given up on NFTs. Less than three years after first hinting at its interest in NFTs, GameStop has ditched its NFT marketplace. As announced in January, the platform is no longer functional for buying and selling assets as of February 2, though it is still viewable online. The game retailer, which began as a U.S.-based brick-and-mortar operation back in 1984, has recently struggled to maintain a profitable business. GameStop was profitable for the first time in years in late 2022, bu...
Regardless, after on-chain sleuths discovered and revealed Chastain’s conduct back in 2021, OpenSea leadership immediately terminated the executive, condemning his behavior and clarifying they were not previously privy to it.
In August, Chastain received a three-month prison sentence, three months’ house arrest, three years of probation, and a $50,000 fine. Prosecutors lauded the result as the first-ever digital asset insider trading scheme.
Chastain’s attorneys took issue with that superlative as well in this week’s filing, claiming that the case’s original judge found the case to be "an odd case, where the victim doesn't feel victimized," and doubted charges would have been filed had it not involved the "sexy, new arena" of NFTs.
Edited by Andrew Hayward
