- Judge Jesse Forman dropped Chastain’s argument, calling it “without foundation.”
- However, Foreman said “insider trading” could be misleading in this case and could be removed from the indictment.
Nate Chastain, the former OpenSea employee accused of the NFT insider trading scheme, was unable to persuade a judge to dismiss the indictment, allowing the case to proceed.
Department of Justice (DOJ) in June Accused Hunt for wire fraud and money laundering over a series of alleged dodgy deals that occurred during his tenure as Chief Product Officer at OpenSea between January and September 2021.
Authorities say Chastain used classified information regarding NFTs that will be displayed on the OpenSea homepage, taking advantage of this knowledge to secretly purchase dozens of tokens just before they appeared.
Chastain later profited from the sale of NFTs, while using anonymous digital wallets and accounts on OpenSea to hide his movements, according to the Department of Justice. He claims to have been born at least 19 ETH ($25,500, at current prices) through trades, based on information from his known portfolios.
Afif Resigned from OpenSea after suspected misappropriation of inside information in September 2021. At that time, a number from NFT merchants It was pointed out on Twitter that Chastain’s wallet has been routinely at the center of transactions that include NFTs that will appear on the premium OpenSea 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 September 14, 2021 more than quadrupled his profits in that particular trade.
Afif try to to drop the charges, as his attorney argues that the existence of stock or commodity trading is a key component of any insider trading crime. They claimed that NFTs are not one of those. But this controversy failed to convince the case judge.
The lawyers also claimed that the government could not prove the money laundering accusations, as Chastain’s crypto transactions in question were made on the Ethereum blockchain and therefore “fully visible to the public.”
The Chastain Affair Isn’t Exactly “Insider Trading”
in motion refusal For his dismissal on October 21, Judge Jesse Furman said Chastain was not charged with insider trading “in the classic sense of the term.”
He is accused of electronic fraud that does not refer to securities or commodities, and instead relates to “obtaining money or property by means of false or fraudulent claims.” So, his argument is “absolutely groundless,” the judge said.
Foreman cited another case as a reference point to make clear that Chastain’s attorney did not make a strong case. In this case, the Wall Street Journal reporter got into a scheme with traders to share the timing and contents of the column so they could use it to make profits.
“The columnist and dealers have been charged and convicted of both securities fraud and mail and telecommunication fraud,” the judge said. They argued overturning the convictions on the grounds that the information in question was not “proprietary.” However, the court ruled that the publication schedule and newspaper column contents constituted property within the Telegraph Fraud Act.
“No court, let alone a ruling, has suggested that a conviction in such a case would require trading in securities or commodities,” the judge said.
However, the judge acknowledged that the term “insider trading” may be misleading in Chastain’s case. The appropriate remedy, he said, would be to delete this phrase from the indictment. This would also prevent the government from using it at trial.
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