OpenSea Ex-Manager's Conviction Overturned in Crypto Insider Trading Case

A US Appeals Court overturned the conviction of Nathaniel Chastain, a former OpenSea product manager, in a case deemed the "first-ever digital asset insider trading scheme." The court ruled that prosecutors improperly argued that Chastain's decision-making about NFTs on OpenSea's homepage constituted "property" of the company, which is not the case. The appeals court noted that Chastain's conduct may still be considered criminal under a different charge, such as fraud based on unethical business dealings.

A U.S. appeals court has overturned the conviction of Nathaniel Chastain, a former OpenSea product manager, in a case deemed the "first-ever digital asset insider trading scheme." The court ruled that prosecutors improperly argued that Chastain's decision-making about NFTs on OpenSea's homepage constituted "property" of the company, which is not the case [1].

Chastain was found guilty of wire fraud and money laundering for manipulating his knowledge of what NFTs would be featured on the marketplace’s landing page to enrich himself. He was sentenced to three months in prison. The Manhattan-based appeals court found that prosecutors in the initial trial were improperly allowed to argue that Chastain’s decision-making about what NFTs were featured on OpenSea’s homepage constituted “property” of the company [2].

The appeals court ruled that Chastain’s decision-making about what NFTs should feature on OpenSea’s homepage did not constitute a traditional property interest of the company. That doesn’t mean Chastain’s conduct was not still potentially criminal. It means that, as Chastain’s attorneys later argued on appeal, he should have faced a different criminal charge, such as fraud based on unethical business dealings [2].

The case will now head back to district court for further proceedings consistent with today's decision. The appeals court also took issue with how the district court overseeing Chastain’s prosecution handled potential testimony about OpenSea CEO Devin Finzer, who allegedly purchased crypto assets, including Polygon's native token, prior to public announcements about the Polygon network's integration with OpenSea [2].

The news comes as OpenSea gears up for its long-awaited token launch, which still does not have a set date. However, the legacy NFT platform has released numerous updates surrounding its XP points system, which is presumed to determine early users’ token allocations [1].

References:
[1] https://thedefiant.io/news/nfts-and-web3/court-overturns-insider-trading-conviction-of-opensea-s-nate-chastain
[2] https://decrypt.co/332932/opensea-chastain-conviction-overturned-crypto-insider-trading