A former head of product at Opensea, Nate Chastain, has failed to convince the court that charges against him should be dismissed, thus clearing the way for his trial to go forward. Chastain charges include money laundering and wire fraud.
Prosecutors allege that he illegally obtained profits from the non-fungible tokens(NFTs) sales last year. As per the prosecutors, Chastain solely made decisions on which NFT would feature on the OpenSea homepage.
Therefore, with this authority, he would buy NFTs before they got featured and flip them for a profit once their value surged. Also, the prosecutors claim that Chastain had several wallet addresses to hold the NFTs and funnel profits to himself.
OpenSea, the world’s largest NFT marketplace, parted ways with Chastain in September 2022 after being informed about the investigation. As per the firm’s blog post, OpenSea promises to cooperate with the authorities and seek assistance from a third party to review and recommend strengthening its existing controls.
Former OpenSea Employee Moves to Court Seeking to Dismiss Alleged Charges
Chastain moved to court to have the charges dismissed. However, his arguments could not convince the judge to drop the case. He argued that he never committed wire fraud since doing so necessitates “the existence of trading in commodities or securities,” which currently does not include non-fungible tokens.
As for money laundering, Chastain says that the government seeks “impermissibly to criminalize the mere movement of funds.” He adds that prosecutors did not prove concealment and financial transaction elements of money laundering allegations.
Judge Denies Motion for Dismissal Raised by Former OpenSea Employee
In denying the motion for dismissal, the judge referenced a court case that involved a Wall Street Journal reporter. As per the court case, the reporter made a deal with traders, tipping them off on the content and timing of articles before they got published and sharing in the generated profits.
The judge reports that the traders and the columnist faced conviction of both wire fraud and securities fraud. According to the judge’s statement, the referenced court case used “insider trading” instead of wire fraud, which may be misleading.
The judge then advised striking the phrase from the indictment and preventing its use at the trial.