By Matthew Russell Lee, Patreon Maxwell Book
SDNY COURTHOUSE, Aug 22 – Already there have been 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.
On August 8, 2023, Chastain's sentencing memo was filed, asking for time served or probation with community service and/or home confinement and stating "we do not here argue the reasons why Nate maintains his innocence."
They argue that the property subject to forfeiture is cryptocurrency (ETH), citing the DDC case of US v. Sterlingov, which Inner City Press is also covering.
On August 15, the US Attorney's Office asked for 21 to 27 months, citing the 24 months that Judge Loretta A. Preska recently gave to Ishan Wahi of Coinbase.
On August 21, the eve of sentencing, Chastain's lawyers put in letter seeking to exclude fromt the loss amount "after-featured NFT purchases."
On August 22, Chastain was sentenced to three months in prison and a $50,000 fine. Inner City Press thread:
OK- near end of sentencing in US v Nate Chastain, described as 1st "NFT insider trading" case. But loss/gain amount is less than $50,000, defense lawyer Miller (who also repped Wahi) says. Judge has taken 5 minute break before announcing sentence.
All rise! Judge: Respect for the law and general deterrence militate for punishment. But he is a first time offender. There are mitigating curcumstances. He has a potentially promising future...
Judge: There was a 2017 case, a few thousand dollars of profit, less than a year sentence. Mr Chastain, I sentence you to 3 months in prison. Story soon. Inner City Press @innercitypress ·
Judge: Mr. Chastain is to self-surrender to prison Nov 2, 2023 at 2 pm. Defense: We request bail pending appeal. Judge: Put it in writing. Before Nov 2... Adjourned.
Watch this site.
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)
***
Your support means a lot. As little as $5 a month helps keep us going and grants you access to exclusive bonus material on our Patreon page. Click here to become a patron.
