Former OpenSea products manager Nathaniel Chastain, convicted of fraud and money laundering in May 2023, is seeking to overturn his conviction. He argues that the court wrongly categorized information about non-fungible tokens (NFTs) as “property.”
Chastain’s responsibilities at OpenSea included selecting NFTs to be showcased on the website’s homepage. He faced allegations of strategically featuring certain NFTs on the homepage to enhance their visibility, purchasing them, and then selling them for an illicit profit exceeding $50,000.
Accused of “misappropriating OpenSea’s confidential business information,” Chastain received a three-month prison sentence, three months’ house arrest, three years of probation, and a $50,000 fine. This marked the federal government’s first indictment related to insider trading of NFTs.
In a recent filing to the United States Court of Appeals for the Second Circuit, Chastain’s lawyers argued that, while his actions might have been unethical, the insider information he used did not hold significant value for OpenSea and, therefore, was not the company’s property.
As the appeals court considers Chastain’s case, the legal landscape surrounding NFTs is evolving, with various cases making headlines.
A recent case involves US Air Force analyst Devin Alan Rhoden facing charges for an NFT scam. Yuga Labs won a lawsuit in April 2023 against Ryder Ripps and Jeremy Cahen regarding their RR/BAYC NFT collection. In November 2023, Mutant Ape Planet NFT creator Aurelien Michel pleaded guilty to defrauding investors in a rug-pull scam.
The increase in such criminal activities has prompted a push for legal recognition. Notably, in November 2023, China began recognizing NFT theft as a crime.