Appeals Court Overturns Initial Verdict in First NFT Securities Fraud Trial
The 2nd U.S. Circuit Court of Appeals in Manhattan has overturned the conviction of Nathaniel Chastain, a former product manager at OpenSea, in a landmark case considered the first insider trading case involving non-fungible tokens (NFTs) by prosecutors. Chastain, who was convicted in May 2023 for wire fraud and money laundering related to insider trading of NFTs, was the head of product at OpenSea and was responsible for deciding which NFTs would be featured on the site. He made approximately $57,000 from buying and selling 15 NFTs. The appeals court, in a 2-1 split decision, believes erroneous jury instructions might have led to Chastain's conviction for unethical behavior, regardless of the information's value to OpenSea. Circuit Judge Steven Menashi believes the district court erred by instructing the jury that Chastain could be found guilty of wire fraud if the misused information lacked commercial value to OpenSea. Menashi also expressed concern that the district court erred by instructing the jury that Chastain's conduct could be found guilty if it departed from 'fundamental honesty and fair play in the general and business life of society,' as this could criminalize almost any deceptive act. The case is still under consideration, and a retrial may or may not occur. It is unclear whether prosecutors plan to retry Chastain. The specific details of the overturned conviction are not provided in the given text. This case was reported in 2022 by a news outlet, and the appeals court has returned the case to U.S. District Judge Jesse Furman in Manhattan. The search results do not contain information about the name of the judge who made the majority decision in favor of Nathaniel Chastain in the appeal case. Chastain used his position to purchase NFTs before they were featured and sell them afterwards, taking advantage of the fact that featured NFTs on OpenSea often appreciated in price. The case highlights the complexities and ethical challenges that arise in the rapidly evolving world of NFTs and digital assets.
