A US federal appeals court has overturned the conviction of Nathaniel Chastain, a former OpenSea manager found guilty of wire fraud and money laundering for using insider information to trade non-fungible tokens (NFTs).
In a Thursday decision, the United States Court of Appeals for the Second Circuit ruled that the jury was improperly instructed and could have convicted Chastain for unethical conduct rather than misappropriating a traditional property interest, a requirement under federal fraud statutes.
“Chastain argues that the district court erred by instructing the jury that it could find him guilty of defrauding OpenSea of its property if he misappropriated an intangible interest unconnected to traditional property rights. He maintains that this error affected the jury’s decision. We agree,” the court decisions reads.
Chastain was initially charged with insider trading in June 2022, tied to OpenSea NFT collectibles he bought and sold the previous year. In 2023, he was convicted of wire fraud and money laundering, receiving a three-month prison sentence and a $50,000 fine.
As Cointelegraph reported, Chastain appealed the conviction in early 2024, arguing that NFT-related information does not qualify as protected property.
“Not all confidential information is property,” Chastain’s appeal stated, adding: “OpenSea made money from Chastain’s trading, because it earned commissions when he used its platform to buy and sell the featured NFTs.”
OpenSea is the world’s largest NFT marketplace, with more than $40 billion in cumulative trading volumes, according to Dune. The marketplace rose to prominence during the 2021-2022 NFT boom, with monthly trading volumes reaching $5 billion in January 2022.
Since that peak, OpenSea’s trading volumes have dropped significantly, mirroring the broader decline in NFT market interest. In June, trading volumes on the marketplace were roughly $82 million.
Yet, according to Dune, the platform has generated $944 million in cumulative revenue since its inception.
Related: OpenSea expands beyond NFTs with OS2 public rollout
