By
Bhushan Akolkar
December 11th, 2023
Judge Jesse Furman denied Chastian’s motion to suppress evidence emerging from the FBI raid at his home
Earlier this year in August, OpenSea filed a case against a former product manager Nate Chastain over allegations of insider trading for non-fungible tokens (NFTs) listed on the platform. In a recent development, a judge in the Southern District of New York has declined to strike the term “insider trading” and suppress evidence from an FBI raid.
Insider Trading on OpenSea
In his argument, Nate Chastain had filed to strike the “insider trading” term while stating that it was “inflammatory, unduly prejudicial, and irrelevant to the crimes charged”. This was to prevent any indictment against him as well as stop the Justice Department from using this term.
Furthermore, Judge Jesse Furman denied Chastian’s motion to suppress evidence emerging from the FBI raid at his home. However, the OpenSea product manager argued that the search violated his Fourth Amendment right against unreasonable search and seizure. He also said that the way the FBI search took place also violated the Fifth Amendment right against self-incrimination.
As per the DoJ case, the OpenSea product manager made heavy profits on NFTs he knew would be listed on OpenSea’s homepage. Thus, Nate Chastain used the privilege of his position at OpenSea to profit from insider information. This alleged activity is similar to the securities violation of insider trading.
However, due to the uncertainty on whether an NFT constitutes a security, the DoJ has levied wire fraud charges against Chastain. However, prosecutors are confident enough that he committed acts similar to insider trading.
The Third Motion in Place
As per reports, a third motion to subpoena OpenSea remains open. Chastain is now seeking documents from OpenSea which he believes could show that executives were aware of the activity. He also wants to show whether the information he allegedly used should be treated as a “property” of OpenSea.
During a conference on Thursday, Judge Jesse Furman will further explain the reasons for the denial. The conference will also set the schedule for the future trial. It will be interesting to see whether Chastain can prove that he did not use any insider information for the trading of newly listed NFTs on OpenSea, and so he didn’t violate any rules.