By Matthew Russell Lee, Patreon Maxwell Book
SDNY COURTHOUSE, May 3 – Already there are several civil Non-Fungible Token cases in the U.S. District Court for the Southern District of New York.
On June 1, 2022 a criminal case was unsealed, charging NATHANIEL CHASTAIN, a former product manager at Ozone Networks, Inc. d/b/a OpenSea (“OpenSea”), with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens, or “NFTs,” by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain."
Inner City Press covered the trial (below) until, on May 2, 2023, Chastain was found guilty and his sentencing set for August 22. Inner City Press was in the courtroom as his attorneys hugged him.
Afterward, US Attorney Damian Williams said in a statement, "Nathaniel Chastain exploited his advanced knowledge of which NFTs would be featured on OpenSea’s website to make profitable trades for himself. Although this case involved trades in novel crypto assets, there was nothing particularly innovative about his conduct — it was fraud. A jury has found that Chastain is guilty of using inside information for his own personal gain, and he now faces time in federal prison." Sam Bankman-Fried is still out on bail - and violating his conditions - on consent.
Back when Chastain was presented, before U.S. District Court for the Southern District of New York Magistrate Judge Barbara C. Moses, Chastain was allowed to leave after signing a $100,000 bond. He can travel throughout the continental US, but urinanalysis was ordered to test for drugs.
On June 15, 2022 Chastain was arraigned before Judge Jesse M. Furman. Discovery includes three phones; there was no post arrest statement. But Chastain's lawyer took the opportunity to ask how it could be insider trader if NFTs are neither securities nor commodities.
On April 17, 2023, Chastain filed an argument in opposition to the US' motions in limine, that he should be able try to convince the jury "that this prosecution is novel and unprecedented," citing a 1984 Second Circuit case, US v. Rosado, about Puerto Rican independentistas.
On April 24, there was jury selection. Inner City Press went. There was a Bronxite who works at Chipotle and a special education math teacher from Rockland County. Then as Juror 18, a man who said he couldn't hear what Judge Furman said. He was excused, with the room's acoustics cited - and replaced by an entrepreneur who said he has bought crypto and NFTs and remembers hearing of the case when it was indicted, and also of Judge Furman.
On April 25, the US filed a letter seeking to bar testimony by Chastain's expert Professor Skinner about an alleged lack of loss to OpenSea, arguing that is not an element of the crime charged. In the alternative, the US asks for a Daubert hearing.
On April 26, a government expert was on the stand testifying about the IP addresses of Chastain's wallets and his profits from NFTs, three times his monthly $11,000 OpenSea salary.
On May 2 the jury was deliberating when, just before 5 pm, they sent out a note: "Re Count One, Element One. If the defendant viewed the information as confidential, but Devin Finzer, the other signatory of the Confidentiality Agreement did not, is that enough consider it confidential?"
Chastain "believe[s] the jury be instructed that the answer is 'no.'" Watch this site.
More on Substack here
Inner City Press will continue to cover these cases.
The case is US v. Chastain, 22-cr-305 (Furman / Moses)
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