U.S. Court Overturns Conviction In OpenSea Insider Trading Case

A U.S. federal appeals court has thrown out the conviction of Nathaniel Chastain, the former OpenSea product manager found guilty last year of wire fraud and money laundering for trading NFTs using insider information.

The Second Circuit Court of Appeals ruled Thursday that the jury in Chastain’s 2023 trial was improperly instructed. According to the court, jurors may have convicted Chastain for acting unethically, rather than for misappropriating a recognized form of property — a key requirement under federal fraud law.

“Chastain argues that the district court erred by instructing the jury that it could find him guilty of defrauding OpenSea of its property if he misappropriated an intangible interest unconnected to traditional property rights,” the ruling said. “We agree.”

Chastain was initially charged in 2022 for allegedly using knowledge of which NFT collections would be featured on OpenSea’s homepage to buy them in advance and sell for a profit. He was later convicted and sentenced to three months in prison and a $50,000 fine.

In his appeal, Chastain argued that confidential information about NFT listings didn’t qualify as property under the law — and pointed out that OpenSea even earned fees from the trades he made.

At its peak in early 2022, OpenSea was the dominant NFT marketplace, posting nearly $5 billion in monthly trading volume. But activity has since cooled. In June, volume on the platform fell to just $82 million, according to data from Dune.

Despite the slowdown, OpenSea has generated nearly $1 billion in cumulative revenue since launch, driven by more than $40 billion in trading volume.

Chastain’s overturned conviction is one of the most high-profile crypto-related insider trading cases to be reversed on appeal.

Earlier in March, Binance suspended a member of its wallet division following allegations of insider trading tied to a recent token launch.

The issue surfaced after the Binance Wallet team received a complaint suggesting one of its employees profited from non-public information. According to Binance, a preliminary internal review found that the staffer — who joined the wallet team last month — used prior knowledge from a former business development role at BNB Chain to front-run trades.

The employee allegedly knew about an upcoming Token Generation Event (TGE) for an unnamed project and expected heavy interest once the news went public. Before the announcement, they reportedly used several linked wallets to buy large amounts of the project’s token, and then offloaded some of the holdings immediately after launch to lock in profits.

While Binance hasn’t named the staffer, online speculation quickly zeroed in on Freddie Ng, a former BNB Chain operations manager who joined Binance Wallet in February. Users on X, including “py,” linked wallets tied to Ng’s online identity to one that profited over $82,000 trading the U DEX Platform (UUU) token — a project that surged to a $31.5 million valuation at its peak on March 23.

Binance said the employee was suspended right away and could face further disciplinary or legal consequences. The company also plans to work with regulators in the relevant jurisdiction, though it didn’t specify which.