Image source: Cryptonary
Nate Chastain, the former head of product at OpenSea, attempted to convince a judge to dismiss the charges made against him.
Chastain was charged with wire fraud and money laundering.
Although he tried, Chastain failed to convince the judge.
As a result, his trial will proceed.
According to the government, Nate Chastain illegally profited from the sale of NFTs last year.
He was responsible for deciding which NFT should be featured on the OpenSea homepage.
The indictment used his authority and knowledge to allege that Chastain bought certain NFTs before they were featured.
It also said he flipped them for profit once their value increased.
According to prosecutors, Chastain set up wallet addresses to hold the NFTs.
He would then wire profits back to himself.
In September, OpenSea parted ways with Chastain upon learning about the investigations.
The company also sought the help of a third party to review the incident and make recommendations to strengthen its existing protocols.
Nate Chastain moved to have the charges dismissed.
He made a series of arguments but failed to sway the judge in the case.
According to Chastain, the information he allegedly misappropriated wasn’t ‘property within the meaning of the statute.
He also argued that he didn’t commit wire fraud, saying that if he did, it would necessitate “the existence of trading in securities or commodities.”
Securities and commodities don’t include NFTs.
The former OpenSea employee called for the charges to be dismissed.
Regarding money laundering, Nate Chastain said the government is trying to “criminalize the mere movement of money.”
He also claims that they didn’t prove the concealment and financial transaction elements of money laundering charges.
When the judge dismissed the motion, they referenced a different court case.
In that case, a Wall Street Journal reporter entered a scheme with traders.
The reporter tipped traders off on the contents and timing of articles before publishing them, sharing the resulting profits.
The document reads:
“The columnist and traders were charged with, and convicted of, both securities fraud and mail and wire fraud.”
“So, not ‘insider training’ as conventionally understood, but definitely ‘wire fraud.’”
The judge conceded that the term ‘insider trading’ could be misleading.
However, he said the right response would be to strike the phrase from the indictment.
It would also prevent the government from using the term for the trial.