Former OpenSea Exec’s NFT ‘Insider Trading’ Case Will Continue

Nate Chastain argued charges over an alleged insider trading scheme shouldn’t stick because NFTs aren’t securities, but a judge wasn’t phased

article-image

Blockworks Exclusive Art by Axel Rangel

share

key takeaways

  • Judge Jesse Furman shot down Chastain’s argument, labeling it “wholly without merit”
  • Furman however said “insider trading” may be misleading in this case and can be struck from the indictment

Nate Chastain, the former OpenSea employee accused of an insider NFT trading scheme, was unable to convince a judge to dismiss his indictment, allowing the case to go ahead.

The Department of Justice in June charged Chastain with wire fraud and money laundering over a series of allegedly dodgy trades which occurred during his tenure as OpenSea’s head of product between January and September 2021.

Authorities say Chastain used confidential information regarding which NFTs would be featured on OpenSea’s homepage, leveraging that knowledge to secretly purchase dozens of tokens just before they appeared. 

Chastain subsequently profited by selling those NFTs, while using anonymous digital wallets and accounts on OpenSea to conceal his moves, according to the DOJ. He allegedly generated at least 19 ETH ($25,500, current price) through the trades, based on information from his known wallets. 

Chastain resigned from OpenSea after being suspected of misappropriating insider information in September 2021. At the time, a number of NFT traders flagged on Twitter that a wallet belonging to Chastain was routinely at the center of transactions involving NFTs that would show up on OpenSea’s featured portal.

Reuters reported he was accused of secretly buying 45 NFTs on 11 different occasions as part of an insider trading scheme. In one such event, his purchase and sale of the NFT “Spectrum of a Ramification Theory” on Sept. 14, 2021 more than quadrupled his profits on that particular trade.

Chastain attempted to have the charges dropped, with his counsel arguing that the existence of securities or commodities trading is an essential element of any insider trading offense — NFTs are neither of those, they contended. But this dispute has failed to convince the case’s judge.

The lawyers also claimed the government cannot prove charges of money laundering, as Chastain’s crypto transactions in question were conducted on the Ethereum blockchain and thus “completely visible to the public.”

Chastain case not exactly ‘insider trading’

In denying the motion to dismiss on Oct. 21, Judge Jesse Furman said Chastain isn’t charged with insider trading in the “classic sense of the term.”

He is charged with wire fraud that makes no reference to either securities or commodities and instead relates to “obtaining money or property by means of false or fraudulent pretenses.” So, his argument is “wholly without merit,” the judge said.

Furman pointed to another case as a reference point to make clear that Chastain’s counsel hadn’t made a solid argument. In that case, a Wall Street Journal reporter entered into a scheme with traders to share the timing and contents of a column so they could use it to make profits.

“The columnist and traders were charged with, and convicted of, both securities fraud and mail and wire fraud,” the judge said. They had argued to reverse the convictions on grounds that the information in question was not “property.” Yet the court ruled that the publication schedule and contents of the newspaper column constituted property within the wire fraud statute.

“No court has suggested, let alone held, that conviction in such a case requires trading in securities or commodities,” the judge said. 

The judge acknowledged, though, that the term “insider trading” may be misleading in Chastain’s case. The appropriate remedy, he said, would be to strike that phrase from the indictment. This would also prevent the government from using it at trial.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (1).jpg

Research

With $13B in tokenized assets, strong institutional partnerships, and a clear first-mover advantage in the RWA space. The platform's methodical approach to regulatory compliance, coupled with its hybrid public-private architecture, positions it uniquely to capture significant market share in the emerging tokenization landscape. While current fee generation primarily stems from metadata transactions, the planned launch of Figure Markets, major exchange listings, and comprehensive market-making initiatives in 2025 could serve as powerful catalysts for growth.

article-image

Perena is built on the premise that as stablecoins proliferate, liquidity could fragment, and stablecoins aren’t useful if they aren’t liquid

article-image

From hackathons to trading tools and DAO governance, AI agents are redefining how we build and innovate

article-image

CME’s large bitcoin contracts are so big that investors are turning to micro bitcoin contracts

article-image

The third-largest stablecoin is going multichain for the first time in its seven-year history

article-image

Nano Labs’ news release notes confidence in bitcoin being “a reliable store of value amidst its rising global adoption”

article-image

Several big companies report third quarter earnings this week, likely moving markets