As previously reported, Opensea, the leading NFT trading platform, disclosed in September that Nate Chastain, the former head of product at Opensea, allegedly used his position to buy NFTS before they hit the market, then sell them for a huge profit.
Then the U.S. Attorney for the Southern District of New York indicted Nate Chastain in June, charging him with wire fraud and money laundering.
According to an investigation by the U.S. Attorney’s Office and the FBI, Nate Chastain learned about OpenSea’s upcoming NFT product on its home page between June and September of last year, and privately purchased dozens of them before the project went live so he could sell them at a higher price.
The selling price is at least two to five times the original purchase price.
But according to court documents, lawyers for Nathaniel Chastain recently filed a motion to dismiss the insider trading charges, arguing that wire-fraud cases require trading in securities or commodities, but NFTS are neither securities nor commodities.
And the government cannot prove whether the particular cryptocurrency transactions it cites qualify as financial transactions under money laundering rules.
Nathaniel Chastain’s lawyer blasted: “The government has set a precedent in the digital asset space by immediately filing a lawsuit citing a baseless application of criminal law…
While the government is trying to use this unprecedented indictment to bring broad charges of insider trading, property theft and money laundering, the government’s argument runs counter to years of established precedent and aims to create a flag for transparency in the blockchain industry.
Could this case set a precedent for NFTS to be treated as securities?
Alma Angotti, a former SEC lawyer, has previously said the case could open the door for NFTS to be treated as securities, according to Cointelegraph,
Nathaniel Chastain is one of the first people in the US to be charged in a case related to insider trading of NFT in the cryptocurrency space.
If Nathaniel Chastain’s legal team reaches a settlement with prosecutors, or if Nathaniel Chastain ultimately loses, it could encourage the SEC to expand its regulatory and enforcement powers over certain cryptocurrencies.
The SEC previously listed nine of the cryptocurrencies in the case as securities in an insider trading complaint against three people, including former Coinbase product manager Ishan Wahi. They are AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM.