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Home»ETHEREUM NEWS»Former OpenSea executive claims NFT insider trading conviction violated the law
ETHEREUM NEWS

Former OpenSea executive claims NFT insider trading conviction violated the law

By Crypto FlexsJanuary 18, 20243 Mins Read
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Former OpenSea executive claims NFT insider trading conviction violated the law
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Former OpenSea executive Nathaniel Chastain, who was convicted of fraud and money laundering last May after profiting from several collections of NFTs he chose to highlight on the marketplace’s homepage, has had his conviction overturned by a federal appeals court on grounds that he was improperly designated. I asked for it. Information about NFTs is considered “property.”

In a brief filed this week with the U.S. Court of Appeals for the Second Circuit, Chastain’s attorneys alleged inside information that Chastain used to his advantage in NFT trading, namely that he planned to feature a collection of NFTs on the OpenSea homepage. —It has no special value to OpenSea and is not the company’s property.

“The only prosecution theory is that Chastain used the information to defraud OpenSea for personal gain,” Chastain’s lawyers argued in their brief. “Thus, to sustain the wire fraud conviction, the government had to prove that the purported ‘target’ of his scheme, i.e., the information in question, was the ‘property’ of OpenSea.”

While working at OpenSea, Chastain regularly purchased NFTs and featured them on the OpenSea homepage. Once the collection sold out due to that exposure, he sold the NFTs to profit from the hype. In total, Chastain earned more than $50,000 using these plans.

Chastain’s attorneys do not dispute that the executive engaged in such activity, nor do they argue that Chastain made good use of the information in his possession.

“There was evidence that Chastain may have believed his actions were unethical or a conflict of interest,” Chastain’s attorney wrote.

But lawyers are critical of the fact that the information Chastain used to get rich was not OpenSea’s “property” and that Chastain’s manipulation of that information did not cost the company any money. The reason the distinction is important, according to them, is 2023 Supreme Court ruling Federal wire fraud laws make it clear that they only prohibit schemes designed to obtain items that have “long been recognized as property.”

Nonetheless, after on-chain investigators discovered and exposed Chastain’s actions in 2021, OpenSea executives Shut down immediately Management condemned his behavior and made it clear that he had not previously been concerned about it.

In August, Chastain 3 months in prison, three months of house arrest, three years of probation, and a $50,000 fine. Prosecutors assessed this result as the first digital asset insider trading scheme.

Chastain’s attorneys also took issue with this superlative in a filing this week, saying the original judge in the case determined the case was “an unusual incident in which the victim did not feel harmed,” and it is doubtful whether charges would have been filed otherwise. claimed. Including the “sexy new arena” for NFTs.

Editor: Andrew Hayward

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