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  2 minute readApril 24, 20234:31 PM UTCLast Updated ago

Ex-OpenSea manager's trial kicks off in first NFT insider trading case

  By [18]Chris Prentice (BUTTON)
  and [19]Luc Cohen (BUTTON)
  Illustration picture of NFT marketplace Opensea
  The logo of non-fungible token (NFT) marketplace OpenSea is seen
  through a magnifying glass amid NFT items displayed on its website, in
  this illustration picture taken February 28, 2022. REUTERS/Florence Lo
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  NEW YORK, April 24 (Reuters) - U.S. prosecutors will square off this
  week against a former employee of OpenSea, the world's largest
  marketplace for non-fungible tokens (NFTs), whom they accuse of insider
  trading.

  The charges against Nathaniel Chastain, a former OpenSea product
  manager, were the first in a series of high-profile cases related to
  digital assets launched by the Manhattan U.S. Attorney's office last
  year. It is considered the first criminal insider trading case
  involving such assets.

  Prosecutors have [21]accused Chastain of secretly buying dozens of NFTs
  based on confidential information that the tokens, or others from the
  same creators, would soon be featured on OpenSea's home page.

  Chastain chose which NFTs to feature, and then profited illegally by
  selling his tokens shortly thereafter, they said.

  "He abused that position of trust," prosecutors said in an April 4
  filing.

  The defendant faces one count of wire fraud and one count of money
  laundering. His trial before U.S. District Judge Jesse Furman in
  Manhattan is expected to last one to two weeks.

  Chastain's lawyers have argued that his actions were not insider
  trading, and that the information he accessed was not OpenSea's
  property and had no inherent value to the company.

  "We are not talking about securities trading," David Miller, a lawyer
  for Chastain, said at a pretrial conference on Thursday.

  He added that if prosecutors mention insider trading, "there is a
  substantial danger of undue prejudice and confusion of the jury."

  Chastain's lawyers have also said OpenSea did not start banning
  employees from buying or selling featured collections or creators until
  Chastain's last day, in September 2021.

  Its new policies "tend to show that OpenSea did not consider - or treat
  - the relevant information to be confidential" while Chastain worked
  there, Miller said in an April 17 filing.

  The case could have broader implications for assets that do not fit
  into existing regulations preventing investment advisers, brokers and
  others from trading on material nonpublic information, said Philip
  Moustakis, a former SEC enforcement lawyer and partner at Seward &
  Kissel LLP.

  "Is it insider trading of anything?" Moustakis said. "If this case
  sticks, there is precedent that insider trading theory can be applied
  to any asset class."
  Reporting by Chris Prentice and Luc Cohen; Editing by Richard Chang
  (BUTTON)
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  Our Standards: [22]The Thomson Reuters Trust Principles.


  [23]Luc Cohen

  Thomson Reuters

  Reports on the New York federal courts. Previously worked as a
  correspondent in Venezuela and Argentina.
    *
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