Prosecutors argue 'insider trading' claim in the OpenSea case is accurate

Published at: Oct. 19, 2022

United States prosecutors have opposed a motion by a former employee of nonfungible token (NFT) marketplace OpenSea to remove “insider trading” references from his charges.

Prosecutors said the phrase accurately describes the crimes the former OpenSea product manager Nathaniel Chastain is accused of in a memo filed on Oct. 14. It was responding to a motion by Chastain to stop referring to the phrase on Oct. 3, according to Law360.

Chastain was charged in June for allegedly buying 45 NFTs from June to September 2021 through anonymous wallets and selling them for a profit. He allegedly used his position at OpenSea to either choose or know which collections were featured on the homepage, which often saw their values increase.

Chastain argued the use of “insider trading” to describe his alleged actions is “inflammatory” and doesn’t have anything to do with the accusations he faces, adding a jury may be influenced by the term if his case is brought to trial.

He also added that “insider trading” only applies to securities and not to NFTs, a claim similarly made in August by his legal team, and the phrase was used to spark attention in the media to skew the jury's view of him.

Prosecutors fired back, stating the phrase “accurately captures” the accusations made against him and the term isn’t “so inherently inflammatory” to warrant the “extreme measure” of having the term removed from his charges.

They also rebuked his claim of insider trading only applying to securities calling it a “legal error” and an “unduly cramped understanding of the phrase" claiming it can be used to reference multiple types of fraud in which someone with non-public knowledge uses it to trade assets.

Related: Brother of former Coinbase employee pleads guilty to charges related to insider trading: Report

The term “insider trading” had previously not been used in reference to cryptocurrencies or NFTs before Chastain’s charges.

In June, shortly after Chastain was charged, former U.S. Securities and Exchange Commission (SEC) lawyer Alma Angotti said the case might see NFTs labeled as securities as they could be considered one under the Howey Test.

The Howey Test is used to determine if a transaction is an “investment contract” which exists when there is the “investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others,” according to the SEC.

Tags
Regulation
United States
Trading
Tokens
Law
Court
Crimes
Opensea
Related Posts
Abramoff-linked crypto firm says SEC has no case against it
The NAC Foundation has accused the United States Securities and Exchange Commission of misconduct in an ongoing case. According to court documents Oct. 20, Rowland Marcus Andrade and his company NAC Foundation asked a San Francisco federal judge to dismiss the SEC’s June lawsuit alleging that he and his associate Jack Abramoff defrauded investors in a $5.6 million token offering. Andrade argued that the SEC “purposefully attempted to mislead the court” by accusing him of offering a technology that had never been developed. According to the defendant, the SEC was aware that he held patents for Anti-Money Laundering technology related …
Regulation / Oct. 21, 2020
US judge dismisses crypto fraud case against BNT token issuer
A federal district court in the United States has dismissed a securities fraud class action against Israel-based cryptocurrency firm Bancor. U.S. district judge Alvin Hellerstein ruled on Monday to dismiss a case against Bancor, stating that plaintiffs had failed to allege losses as well as citing lack of personal jurisdiction. The judge has also canceled an oral argument scheduled for March 4, 2021, entering judgment in favor of the defendants. The case was brought by New York law firms Roche Cyrulnik Freedman and Selendy & Gay in April 2020, alleging that the Bancor protocol developer, BProtocol Foundation, violated federal and …
Regulation / Feb. 24, 2021
Blockchain Association Weighs in on SEC Case Against Kik’s ICO
The United States-based Blockchain Association has filed an amicus curiae brief in support of Canadian messenger Kik amid the firm’s legal battle with the Securities and Exchange Commission. The association addressed the April 17 brief to the court which is considering the case, asking it to deny the SEC’s motion for summary judgment and decide the case narrowly to avoid casting doubt on cryptocurrency projects that have yet to appear before the court. In March, the SEC requested summary judgment, claiming that it possessed “undisputed evidence” that Kik’s ICO distributed unlicensed securities. Not the same as Telegram’s case Basically, the …
Regulation / April 21, 2020
US Court Temporarily Freezes $8M in Response to SEC Request Yesterday
A United States District Court has entered an emergency freeze to preserve $8 million of a New York citizen and two of his entities’ related assets following the U.S. Securities and Exchange Commission (SEC) complaint filed on Aug. 12. Per the SEC's announcement published on Aug. 13, the court ordered the temporary freeze of at least $8 million of the $14.8 million raised by the defendants. The sum was reportedly raised by Reginald Middleton and two entities under his management, Veritaseum, Inc. and Veritaseum, LLC, in 2017 and 2018 by conducting an allegedly fraudulent and unregistered initial coin offering. The …
United States / Aug. 13, 2019
EmpiresX 'head trader' to face 4 years of prison over $100M crypto 'Ponzi'
One of the leading figures convicted of being behind the $100 million crypto “Ponzi” scheme, EmpiresX, has just been handed an over four-year jail sentence by a United States court. The sentencing was handed to Joshua David Nicholas, the “head trader” of purported crypto platform EmpiresX, who is nowset to serve a 51-month prison sentence along with three years of supervised release for his role in the fraudulent scheme. It follows a Sept. 8 guilty plea from Nicholas for conspiracy to commit securities fraud. According to the Department of Justice (DOJ), over a two-year period, Nicholas made claims the platform …
Regulation / Dec. 1, 2022