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Judge allows DOJ to call OpenSea NFT case ‘Insider Trading’, sets trial date

Judge allows DOJ to call OpenSea NFT case 'Insider Trading', sets trial date

The former director of product at OpenSea, Nathaniel Chastain, will stand trial on April 24, according to court documents.

Chastain will be charged with wire fraud and money laundering during the trial.

Yesterday, U.S. District Judge Jesse M. Furman issued a memo in which he denied several motions filed by both parties involved in the case. The judge also stated that the arguments presented by Chastain regarding the use of the term “insider trading” are no longer relevant.

According to the DOJ, the case against Chastain marks the inaugural instance of an insider trading scheme that involves digital assets. Chastain’s legal team has raised a question regarding the precedent for insider trading, as the assets in question do not fall under the category of securities or commodities.

Chastain was charged for the first time in October 2022, when he was indicted for alleged unlawful profit from NFT sales in 2021. Prosecutors alleged that Chastain used inside information about which NFTs would be featured on the front page of OpenSea to purchase NFTs before they were featured and then sell them for a profit after they were featured.

The judge granted the government’s motion to exclude expert witness testimony. A second motion to exclude arguments that OpenSea suffered no damage was also granted, with the proviso that expert testimony “may open the door to evidence about the effects (or lack thereof) of Chastain’s conduct,” as Furman explained in the memo.

Chastain may have the opportunity to testify in court regarding the impact of his actions on his previous employer. According to the judge’s statement, Chastain has the option to provide testimony regarding his beliefs on the impact of his actions on OpenSea. This testimony could potentially serve as evidence of his willfulness and intent.

In February, former Coinbase product manager Ishan Wahi pleaded guilty to two counts of conspiracy to commit wire fraud in a separate case of trading digital assets while having inside information. Wahi’s attorneys made a similar case and tried to get the Securities and Exchange Commission’s case thrown out on the grounds that the tokens he traded are still not clearly defined as securities by the regulations.

Prosecutors filed charges against Wahi, his brother Nikkhil, and another individual, Sameer Ramani, for allegedly violating securities laws, while the SEC simultaneously filed civil charges against the trio.

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