Lawyers for former OpenSea head of product Nathaniel Chastain have filed a motion to dismiss an indictment against him on alleged charges of wire fraud and money laundering claims that he made use of insider knowledge of which non-fungible token (NFT) collections were going to be featured on OpenSea. According to court documents, Chastain’s legal team has argued that NFTs have not been classified as securities or commodities. Since insider trading has to do with using privileged, non-public information to trade securities, such charges cannot be imposed on the ex-OpenSea employee.
The filing says that the effort to prosecute Chastain “must fail for multiple independent reasons” before highlighting those said reasons. The defendant’s lawyers state that the NFTs are neither securities nor commodities and say that the government agrees, adding that the decades of legal developments in the past render the charge of insider trading moot.
The filing reads, “The rub, however, is that the NFTs are neither securities nor commodities. And the government agrees. Thus, we are left with a case of first impression — on multiple fronts. Can the government proceed on a Carpenter wire fraud theory of insider trading in the absence of any allegation involving securities or commodities trading? The government, of course, says yes. The Supreme Court and 40 years of insider trading precedent say no.”
The lawyers also claim that the government cannot prove whether the specific crypto transactions it cites qualify as financial transactions under money laundering rules.
Chastain is accused of using confidential OpenSea business information to secretly purchase NFTs shortly before they were featured on the company’s homepage. After he bought the NFTs, Chastain allegedly sold them for a profit. He is also accused of conducting purchases using anonymous digital currency wallets and anonymous OpenSea accounts. The company acknowledged the incident in a blog post.