According to a motion that was filed early on Monday, former product head for non-fungible token (NFT) marketplace OpenSea Nate Chastain has urged a U.S. court to dismiss insider trading accusations regarding the selling of NFTs on the popular platform.
The motion, which was brought before the United States District Court for the Southern District of New York, asserted that non-fungible tokens (NFTs) cannot be categorized as securities or commodities, which is a prerequisite for accusations of wire fraud.
After Chastain allegedly made transactions in June based on insider information about which NFT collections would be displayed on OpenSea, the Department of Justice and the FBI arrested and accused him of wire fraud and money laundering.
According to the Department of Justice, the case involving Chastain was the very first instance of an insider trading scam using a digital asset. The practice of leveraging non-public knowledge to one’s advantage in order to make profitable trades is known as “insider trading.”
The motion stated that:
“As alleged, acting with purported criminal intent, Mr. Chastain exploited his advance knowledge of which NFTs would be featured on OpenSea’s homepage by purchasing certain NFTs before they were featured and selling them at a profit after they were featured.”
According to the accusations, Chastain utilized information that only an employee would have access to in order to determine which NFTs would be published so that he could sell them for two to five times the amount he paid for them initially. This enabled him to make a profit.
The motion added that:
“In any prosecution under a Carpenter wire fraud theory of insider trading, the existence of securities or commodities trading remains an essential element of the offense.”
