Former OpenSea Manager Accused By Prosecutors Of Insider Trading
Prosecutors in the United States have denied a request by a former employee of nonfungible token (NFT) marketplace OpenSea to have “insider trading” references removed from his charges.
Prosecutors claimed the statement closely matches the offenses suspected of former OpenSea product manager Nathaniel Chastain in an October 14 memo. According to Law360, it was in response to Chastain’s move to discontinue using the term on October 3.
Chastain was accused in June of allegedly purchasing 45 NFTs using anonymous wallets and selling them for a profit between June and September 2021. He reportedly exploited his position at OpenSea to either pick or be aware of which collections were displayed on the site, causing their valuations to rise.
Chastain stated that using the phrase insider trading to describe his alleged acts is inflammatory and has nothing to do with the allegations he faces and that the term may sway a jury if his case goes to trial.
He also stated that insider trading only applies to equities and not to NFTs, a claim made by his legal team in August, and the word was utilized to get media attention.
Prosecutors responded, saying the word accurately captures the claims leveled against him and that the term isn’t so inherently inflammatory enough to merit the extreme measure of having it removed from his charges.
They also called his notion that insider trading solely applies to stocks a legal error and an unduly cramped understanding of the phrase, stating it can be used to refer to a variety of sorts of fraud in which someone with non-public knowledge uses it to trade assets.
Prior to Chastain’s allegations, the word insider trading had not been utilized in relation to cryptocurrencies or NFTs.
Former US Securities and Exchange Commission (SEC) lawyer Alma Angotti claimed in June, shortly after Chastain was accused, that the case might result in NFTs being branded as securities since they meet the Howey test.
According to the SEC, the Howey test is used to establish if a transaction is an investment contract, which arises when there is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.
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