On June 1, 2022, the U.S. Attorney’s Office for the Southern District of New York charged former OpenSea employee Nathaniel Chastain with wire fraud1 for an NFT “insider trading” scheme. At the time, we here at SKrypto asked: If the case survives judicial scrutiny, could the government charge “insider trading” of anything? In May 2023, Chastain was convicted by a jury after trial, suggesting that may be true. He was later sentenced to three months in prison, time he served while pursuing his appeal.
However, on July 31, 2025, the U.S. Court of Appeals for the Second Circuit vacated Chastain’s conviction, finding the information he misappropriated from OpenSea could not sustain the wire fraud charge because it had no economic value to the company.
The government alleged Chastain purchased dozens of NFTs immediately before they were featured on OpenSea’s homepage. (Chastain knew which NFTs would be featured because it was among his job responsibilities to choose them.) The NFTs typically rose in value after OpenSea featured them and Chastain sold them for two to five times the prices he paid.
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The government relied on a misappropriation theory, namely that Chastain misappropriated OpenSea’s information for his personal gain in violation of duties he owed to the company to keep such information confidential and to refrain from using it except to benefit the company.
However, to be guilty of wire fraud, a defendant must (1) devise or intend to devise a scheme (2) to obtain money or property (3) by means of false or fraudulent pretenses, representations, or promises. In its decision, the Second Circuit held the wire fraud statute reaches only traditional property interests and not all information kept confidential qualifies as property. Confidential business information does not qualify as property, the Court held, if it lacks commercial value to the business. Here, there was no evidence the information concerning which NFTs would be featured on OpenSea’s site had commercial value to the company. If the government had charged securities fraud, that would not have been an element of the crime. But then, the government would have had to prove the NFTs were securities.
Furthermore, the Second Circuit found the trial court’s jury instruction allowed the jury to convict based on the government’s view that Chastain lacked integrity in his business conduct rather than misappropriation of property as required under the statute. We are not sure there any practical takeaways to be had from the Court’s decision, but it is good to know not all lapses in judgment are crimes.
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1 Unlike in a traditional insider trading case, the government will not have to prove the NFTs were securities because it did not charge securities fraud.
