Former OpenSea manager withdraws application for bail pending appeal

September 7, 2023 Coin Telegraph

The attorneys representing Nathaniel Chastain informed the court that Chastain will self-surrender on Nov. 2 to begin serving his sentence.

A former manager at nonfungible token marketplace OpenSea sentenced to three months in prison for insider trading has opted to serve the sentence while his appeal is pending.

On Sept. 6, Nathaniel Chastain’s lawyers filed a letter with a New York District Court informing the judge that Chastain decided to withdraw his application for bail pending appeal.

As a result, per the court's previous order and judgment, Chastain will self-surrender by Nov. 2 to begin serving his sentence while his appeal is pending.

*Screenshot of the letter from Chastain’s lawyers. Source: CourtListener*

Chastain, a former OpenSea product manager, was convicted on May 3 on counts of wire fraud and money laundering and on Aug. 22 was sentenced to three months in prison for offenses relating to insider trading on the NFT platform.

He was also ordered to pay a $50,000 fine and forfeit any ill-gotten crypto he made from trading on OpenSea.

Chastain had control over which NFTs and collections would be featured on OpenSea’s homepage — greatly increasing their visibility and possibly impacting their price.

He’s alleged to have purchased 45 NFTs prior to featuring them on the homepage and then reselling them for a profit once their prices had increased.

Prosecuting attorney Allison Nichols argued at the time that Chastain knew he was breaking the law by using anonymous OpenSea accounts to make the trades.

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Jury convicts former OpenSea manager in NFT-insider trading case

May 3, 2023 Coin Telegraph

Coin Telegraph

Prosecutors claimed Nathaniel Chastain profited from inside information as to which NFTs would be featured on the marketplace.

The former OpenSea manager who was accused of insider trading of NFTs has been convicted on May 3 of wire fraud and money laundering in a New York federal court, according to a report from Reuters.

According to prosecutors, Nathaniel Chastain, a former Product Manager at OpenSea, was in charge of choosing which NFTs would be featured on the website’s non-fungible token (NFT) marketplace.

After making these decisions, he frequently purchased these NFTs and then resold them after they had been featured, prosecutors said. He was charged with wire fraud and money laundering on June 1 in connection with these alleged transactions.

*OpenSea's home page displaying featured NFTs. Source: OpenSea*

The trial began on April 24 and has been watched closely by lawyers specializing in crypto-related issues. Some legal experts have argued that the outcome of the case may affect whether NFTs are considered securities.

According to the May 3 report, defense attorney Daniel Filor argued in the trial’s closing statements that Chastain wasn’t guilty because he had never been told the information was supposed to be confidential, stating “Nobody told Nate that he couldn't use or share that information."

By contrast, prosecuting attorney Allison Nichols argued that Chastain knew he was breaking the law. She claimed that he used anonymous OpenSea accounts to make the trades, implying that he was afraid of being caught.

"He hid what he was doing," Nichols reportedly told the jury in her rebuttal. "He knew that he had violated OpenSea's confidentiality agreement."

It marks the first time a person has been slapped for using privileged knowledge to trade non-fungible tokens (NFTs).

A former employee of Coinbase, Ishan Wahi, and his brother Nikhil were also charged with insider trading of cryptocurrencies in a separate case in July. In that case, Nikhil Wahi pled guilty on September 12.

Prosecutors argue ‘insider trading’ claim in the OpenSea case is accurate

October 19, 2022 Coin Telegraph

Charges

Federal prosecutors have argued against a claim made by the former OpenSea product manager that the term “insider trading” is “inflammatory.”

United States prosecutors have opposed a motion by a former employee of nonfungible token (NFT) marketplace OpenSea to remove “insider trading” references from his charges.

Prosecutors said the phrase accurately describes the crimes the former OpenSea product manager Nathaniel Chastain is accused of in a memo filed on Oct. 14. It was responding to a motion by Chastain to stop referring to the phrase on Oct. 3, according to Law360.

Chastain was charged in June for allegedly buying 45 NFTs from June to September 2021 through anonymous wallets and selling them for a profit. He allegedly used his position at OpenSea to either choose or know which collections were featured on the homepage, which often saw their values increase.

Chastain argued the use of “insider trading” to describe his alleged actions is “inflammatory” and doesn’t have anything to do with the accusations he faces, adding a jury may be influenced by the term if his case is brought to trial.

He also added that “insider trading” only applies to securities and not to NFTs, a claim similarly made in August by his legal team, and the phrase was used to spark attention in the media to skew the jury's view of him.

Prosecutors fired back, stating the phrase “accurately captures” the accusations made against him and the term isn’t “so inherently inflammatory” to warrant the “extreme measure” of having the term removed from his charges.

They also rebuked his claim of insider trading only applying to securities calling it a “legal error” and an “unduly cramped understanding of the phrase" claiming it can be used to reference multiple types of fraud in which someone with non-public knowledge uses it to trade assets.

The term “insider trading” had previously not been used in reference to cryptocurrencies or NFTs before Chastain’s charges.

In June, shortly after Chastain was charged, former U.S. Securities and Exchange Commission (SEC) lawyer Alma Angotti said the case might see NFTs labeled as securities as they could be considered one under the Howey Test.

The Howey Test is used to determine if a transaction is an “investment contract” which exists when there is the “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” according to the SEC.

Nathaniel Chastain