Nathaniel Chastain, a former product manager at NFT marketplace OpenSea, has filed a motion to dismiss the Department of Justice’s insider trading case against him, according to court documents.
In the filing done on Monday, Chastain claims that the case against him cannot hold given non-fungible tokens, or NFTs, can’t be deemed as securities or commodities. In this case then, he cannot face the DOJ’s wire fraud charges.
The motion was filed in the United States District Court for the Southern District of New York.
As noted, Chastain’s legal argument for the dismissal of the charges is based on the Carpenter v. United States, 484 US. 19 (1987) – the Carpenter wire fraud theory.
The ex-OpenSea executive’s legal team notes a basic look at the requirements for insider trading based on the Carpenter v. United States, highlights the need for there to be securities or commodities for one facing wire fraud charges.
His lawyers argued that the government’s position on the matter displayed a “flawed understanding of Carpenter [theory].”
“In any prosecution under a Carpenter wire fraud theory of insider trading, the existence of securities or commodities trading remains an essential element of the offense,” the motion reads.
According to Chastain’s legal team, the whole issue is premised on the fact that “the object of the Carpenter decision … is not only to prevent the misappropriation of confidential information in breach of a duty owed to the source of that information, but critically, to protect financial markets.”
The DOJ charged Chastain in June, referring to allegations against him as the ‘first-ever digital assets trading scheme.” The accusations stated that the former OpenSea staff used insider information to trade on NFTs that were set to list on the leading marketplace.
The US Securities and Exchange Commission (SEC) also recently filed charges against a former Coinbase employee and two other people over insider trading.