Former OpenSea Employee Nate Chastain Wins NFT Insider Trading Appeal

Former OpenSea employee Nate Chastain has won a long appeal process, overturning what the government had previously celebrated as the first NFT insider trading case.

The U.S. Court of Appeals for the Second Circuit ruled that wire fraud and money laundering charges against Chastain should be overturned based on instructions that were improperly passed to the jurors in the trial.

"Chastain argues that the district court erred by instructing the jury that it could find him guilty of defrauding OpenSea of its property if he misappropriated an intangible interest unconnected to traditional property rights," the decision reads. "He maintains that this error affected the jury’s decision. We agree... We vacate the judgment of conviction for wire fraud and money laundering and remand for further proceedings consistent with this opinion."

Prosecutors targeted Chastain's case in order to prove a point about digital assets and insider information at a time when NFTs were first exploding in popularity. They argued in court that he stole OpenSea's confidential information, including which NFT projects might be featured on the company's home page, and bought those NFTs ahead of time before eventually selling them for a modest profit.

Court papers show Chastain made nearly $57,000 from buying and selling about 15 NFTs. The wire fraud and money laundering charges were unveiled in June 2022.

Chastain had been convicted by the jury in his case and sentenced to three months in prison in 2023. At the time U.S. district attorney Damian Williams celebrated the ruling, saying, “Nathanial Chastain faced justice today for violating the trust that his employer placed in him by using OpenSea’s confidential information for his own profit."

That certainly looks much different now. As the ruling explains, "The district court erred by instructing the jury that the featured NFT information could be OpenSea’s property under the wire fraud statute even though the information had no commercial value to the company."

As Coinage reported from the courtroom that day, jurors had asked a critical question precisely about that during deliberations and right before delivering their verdict.

"Those instructions invited the jury to return a guilty verdict if it found that Chastain had acted unethically even if he did not invade a traditional property interest of the company," the ruling reads.

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