MSTR Cat

Crypto Law/Level VI · Market conduct/6.2 Insiders and rugs/Lesson 3

The OpenSea case

How the first NFT ‘insider trading’ prosecution won a conviction, lost it on appeal over what counts as property, and ended with a deferred prosecution agreement in 2026.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Staff of marketplaces and platforms: the cheapest course is never to trade assets you are about to feature, list or promote. Even after the 2025 Second Circuit vacatur, Chastain had served his custodial sentence and gave up 15.98 ETH.
  2. The 2025 Chastain holding requires commercial value for confidential information to be wire-fraud ‘property’, but binds only the Second Circuit: New York, Connecticut and Vermont. Catch: revenue-linked information, such as listing decisions, can still be property there and elsewhere.
  3. Employers: a written policy barring staff from trading on feature, listing or curation decisions costs nothing and supports dismissal or contract claims regardless of criminal law. Catch: it must define the information covered and be acknowledged by staff.
  4. Disclose personal wallets to your employer rather than trading through anonymous ones; disclosure is free, while prosecutors pointed to Chastain’s anonymous wallets and accounts. Privacy from the public stays lawful; concealment from an employer you owe duties to does not.

MaterialsThe US Attorney’s press releases of 1 June 2022 (indictment) and 22 August 2023 (sentence) in United States v. ChastainThe Second Circuit’s decision of 31 July 2025 in United States v. Chastain, No. 23-7038, or a reliable summary of itThe district court docket, 22 Cr. 305 (JMF), including the 2026 deferred prosecution agreement and nolle prosequi18 U.S.C. §1343, the wire fraud statute

Wonder

  1. Is it a crime for a platform employee to buy NFTs he knows his employer is about to promote?
  2. Why did an appeals court throw out the conviction?
  3. What does the outcome mean for people who work at marketplaces and exchanges?

Explore

  1. Nathaniel Chastain was a product manager at Ozone Networks, which operates OpenSea, the NFT marketplace. Part of his job was choosing which NFTs would be featured on OpenSea’s homepage, and featured NFTs, along with others by the same creator, typically rose in price. Prosecutors said that from about June to September 2021 he bought dozens of NFTs shortly before featuring them and sold them for two to five times what he paid, using anonymous wallets and accounts. Users spotted the pattern on-chain in September 2021, and OpenSea asked him to resign. His gains were reported at about $57,000.
  2. An indictment was returned on 31 May 2022 and unsealed on 1 June 2022 in the Southern District of New York, charging one count of wire fraud and one of money laundering, each with a maximum of 20 years. Prosecutors called it the first digital asset insider trading scheme they had charged. Because NFTs were not alleged to be securities, the case used the theory from the Coinbase case (lesson 6.2.2): Chastain had misappropriated his employer’s confidential business information, which the government treated as property under 18 U.S.C. §1343, in breach of his duties of trust and confidence.
  3. A jury convicted Chastain on both counts on 3 May 2023. On 22 August 2023 Judge Jesse Furman sentenced him to three months in prison, three months of home confinement and three years of supervised release, fined him $50,000 and ordered forfeiture of the Ethereum he made, later recorded as 15.98 ETH. He served the custodial parts of the sentence and appealed. The case drew attention because it applied an insider-trading label to assets outside the securities laws, relying on fraud statutes instead.
  4. On 31 July 2025 the Second Circuit vacated both convictions. The majority held that, to be ‘property’ under the wire fraud statute, confidential business information must have commercial value to the employer. The trial judge’s instructions had let the jury convict even if the information lacked such value, and on conduct that merely departed from ‘fundamental honesty and fair play’. The evidence on value was equivocal: OpenSea earned fees on trades but did not sell or otherwise monetise its choice of featured NFTs, and harm to its reputation alone was not enough. Judge José Cabranes dissented.
  5. The case then ended without a conviction. The mandate returned the case to the district court on 5 January 2026. On 22 January 2026 the court approved a deferred prosecution agreement with a one-month term: Chastain agreed not to contest forfeiture of the 15.98 ETH and to obey the law, and the government consented to return of his $50,000 fine and $200 special assessment. In February 2026 the court ordered the $50,200 refunded and, after the government reported his compliance, a nolle prosequi disposed of the indictment.
  6. For builders the holding is narrower than headlines suggest. It binds federal courts in the Second Circuit, covering New York, Connecticut and Vermont; other circuits may read Carpenter differently. It does not stop an employer from firing staff or suing them under contract, and information with clear commercial value, such as an exchange’s listing decisions, may still count as property. A practical check: list the confidential decisions your team makes, ask whether each one feeds the business’s revenue, and see whether your written policy says staff may not trade on them (lesson 6.2.2).

Key facts

  • Nathaniel Chastain was indicted in the Southern District of New York on 31 May 2022 on one count of wire fraud and one count of money laundering over trades in NFTs he chose to feature on OpenSea’s homepage.
  • A jury convicted Chastain on both counts on 3 May 2023.
  • On 22 August 2023 Judge Jesse Furman sentenced Chastain to three months in prison, three months of home confinement, three years of supervised release and a $50,000 fine.
  • On 31 July 2025 the Second Circuit vacated Chastain’s convictions, holding that confidential business information must have commercial value to the employer to be property under the wire fraud statute.
  • On 22 January 2026 the district court approved a deferred prosecution agreement under which Chastain did not contest forfeiture of 15.98 ETH.
  • In February 2026 the government filed a nolle prosequi disposing of the Chastain indictment, and the court ordered his $50,000 fine and $200 special assessment returned.

Exercise nine, six, three, one

9CollectList up to 9 decisions a crypto marketplace, exchange or token project makes in private before announcing them (some lists are shorter), such as featuring an item, listing a token or scheduling an unlock.
6ClusterSort them into 6 categories: promotion choices, listing decisions, supply events, partnerships, fee or rule changes, and decisions you are unsure about.
3DistillReduce the 6 categories to 3 groups: decisions that clearly earn the business money, decisions that matter mainly to users’ prices, and decisions that do both.
1CrystallizeWrite 1 sentence explaining, in your own words, why the Second Circuit asked whether OpenSea’s featuring decisions had commercial value to OpenSea.

Fact check

Dates, figures and claims checked against the published sources listed below.

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