Lawyers representing Nathaniel Chastain, a former OpenSea product manager accused of insider trading, allege that US authorities have only brought charges in an attempt to set legal precedent that non-perishable tokens (NFTs) are securities.
In a filing Friday in New York’s Southern District Court, Chastain’s legal team of Greenberg Traurig filed a motion to dismiss the indictment against him, which included allegations of wire fraud and money laundering related to the June-September 2021 NFT insider trading scheme, lawyers argued, that the charges against The former OpenSea employee was invalid in part “because the NFTs in question are neither securities nor commodities” and the tokens were not legally considered the property of the platform.
“The government brought an immediate lawsuit using improper criminal law applications to set a precedent in the digital asset space,” Chastain’s legal team said. “While seeking to use this first-of-its-kind trial to enforce broad assertions about internal trade, property theft, and money laundering, the government’s arguments run counter to years of established precedent and are a transparent effort to instill science into the blockchain industry.”
Prosecutors accused Chastain of insider trading in June, alleging that he used his position and inside information at OpenSea to purchase 45 NFTs before they were scheduled to be displayed on the marketplace’s website. He allegedly used anonymous hot wallets and accounts, and later sold NFTs for a profit. Not writing about Chastain by name, the OpenSea co-founder and CEO confirmed some of the allegations in a blog post in September 2021, noting that the employee had resigned.
Cointelegraph reported in June that former Securities and Exchange Commission attorney Alma Angoti said the case could open doors for NFTs to be classified as securities. Chastain was one of the first individuals to be indicted in the United States in a case related to insider trading of NFTs in the crypto space.
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If Chastain’s legal team reaches an agreement with prosecutors or loses the case, it could encourage the Securities and Exchange Commission to expand its regulatory and enforcement powers over certain cryptocurrencies. The Securities and Exchange Commission (SEC) has taken a similar step to classify nine crypto assets as securities in an insider trading case against former Coinbase product manager Ishan Wahi, his brother and partner.