Key Notes
- Appeals court ruled jury received incorrect instructions regarding property law requirements for fraud convictions.
- Chastain allegedly bought NFTs before featuring them on OpenSea's homepage to profit from increased exposure and prices.
- Original sentence included three months jail time, house arrest, probation, community service and $50,000 fine plus asset forfeiture.
Nathaniel Chastain, a former manager at the OpenSea non-fungible token ( NFT ) marketplace, had his convictions for alleged wire fraud and money laundering overturned on appeal in a July 31 decision by the US District Court for the Southern District of New York.
Chastain, who was convicted in 2023, appealed the conviction on the grounds that instructions given to the jury were erroneous. According to court documents , the jury wasn’t properly instructed on the requirements for criminal activity related to fraud and laundering when it comes to property law.
In the judge’s response to the appeal, the court admitted that “the jury could have convicted Chastain of fraud based on unethical business dealings even if he did not intrude on anything resembling a traditional property interest of OpenSea.” The court thus recognized that the jury may not have found the defendant guilty if it had been “properly instructed that fraud requires the appropriation of a property interest rather than unprofessional business conduct.”
As Coinspeaker reported in August 2023, Chastain was charged with fraud and money laundering for what essentially equates to accusations of insider trading. Part of the manager’s responsibility while working at OpenSea involved selecting which tokens would be featured on OpenSea’s home page.
According to the court, Chastain committed fraud and market manipulation when he personally purchased numerous tokens prior to listing them on the homepage, thus allowing him to buy the NFTs just before their prices were driven up by the exposure.
Heavy Penalties Overturned Despite Market Manipulation Claims
Chastain was initially sentenced to a jail term of three months with an additional three months to be served under house arrest along with three years’ supervised probation, 300 hours of community service, a fine in the amount of $50,000, and a court order to return 15.98 ETH allegedly stolen in the so-called criminal scheme.
The former manager’s lawyers initially attempted to get the case dismissed on grounds that NFTs were neither securities nor commodities and the charges hinged entirely on Chastain’s alleged abuse of information, a tactic it used again upon appeal. Ultimately, the court issued a partial agreement in dismissing the case. Chastain could face retrial in the Southern District of New York court.
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