OpenSea insider trading case could increase government power
Nathaniel Chastain, formerly of OpenSea, has filed a motion to dismiss the indictment filed against him for insider trading.
Chastain had been charged with wire fraud and money laundering related to an alleged scheme in which he would purchase NFTs before featuring them on OpenSea and selling them for a profit.
Both Nathaniel’s memorandum of law in favor of the motion to dismiss and the request to file an amicus curiae brief in support of dismissal by Schulte Roth & Zabel claim that the prosecutors are expanding the theory of wire fraud from Carpenter v. United States, 484 U.S. 19 (1987) which the government cited at the pre-trial conference.
Carpenter v. United States was a case that involved one of the writers of Heard on the Street for the Wall Street Journal sharing information about stocks that were going to be featured with two friends. The sharing of this information was considered ‘misappropriation’ of confidential business information.
Read more: With weak guards against NFT theft, OpenSea will just call the police
Notably, in Carpenter, the defendant was charged with securities fraud, and the defense claims that the misappropriation of this information for the wire fraud charge only makes sense when considered alongside the judicial interpretations of insider trading. This is important because the government specifically didn’t charge Nathaniel with securities fraud.
Both Nathaniel’s memorandum and Schulte Roth & Zabel worry that if Nathaniel is sentenced then that will effectively expand the wire-fraud statue so that it would apply to a much larger number of cases of employees ‘taking’ confidential business information, and would criminalize a much larger number of employer-employee disputes.
Currently, the next pretrial conference is scheduled to be held on October 27, and Nathaniel’s motion has requested oral arguments.
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