NEW YORK, April 24 (Reuters) – U.S. prosecutors will sq. off this week in opposition to a former worker of OpenSea, the world’s largest market for non-fungible tokens (NFTs), whom they accuse of insider buying and selling.
The fees in opposition to Nathaniel Chastain, a former OpenSea product supervisor, had been the primary in a sequence of high-profile instances associated to digital belongings launched by the Manhattan U.S. Legal professional’s workplace final 12 months. It’s thought-about the primary legal insider buying and selling case involving such belongings.
Prosecutors have accused Chastain of secretly shopping for dozens of NFTs primarily based on confidential data that the tokens, or others from the identical creators, would quickly be featured on OpenSea’s dwelling web page.
Chastain selected which NFTs to function, after which profited illegally by promoting his tokens shortly thereafter, they mentioned.
“He abused that place of belief,” prosecutors mentioned in an April 4 submitting.
The defendant faces one rely of wire fraud and one rely of cash laundering. His trial earlier than U.S. District Choose Jesse Furman in Manhattan is predicted to final one to 2 weeks.
Chastain’s legal professionals have argued that his actions weren’t insider buying and selling, and that the data he accessed was not OpenSea’s property and had no inherent worth to the corporate.
“We aren’t speaking about securities buying and selling,” David Miller, a lawyer for Chastain, mentioned at a pretrial convention on Thursday.
He added that if prosecutors point out insider buying and selling, “there’s a substantial hazard of undue prejudice and confusion of the jury.”
Chastain’s legal professionals have additionally mentioned OpenSea didn’t begin banning workers from shopping for or promoting featured collections or creators till Chastain’s final day, in September 2021.
Its new insurance policies “have a tendency to indicate that OpenSea didn’t take into account – or deal with – the related data to be confidential” whereas Chastain labored there, Miller mentioned in an April 17 submitting.
The case might have broader implications for belongings that don’t match into current rules stopping funding advisers, brokers and others from buying and selling on materials nonpublic data, mentioned Philip Moustakis, a former SEC enforcement lawyer and associate at Seward & Kissel LLP.
“Is it insider buying and selling of something?” Moustakis mentioned. “If this case sticks, there’s precedent that insider buying and selling principle will be utilized to any asset class.”
Reporting by Chris Prentice and Luc Cohen; Enhancing by Richard Chang
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