On July 31, 2025, the US Court of Appeals for the Second Circuit delivered a significant ruling by vacating the conviction of Nathaniel Chastain, a former executive at OpenSea. Chastain faced charges of wire fraud and money laundering stemming from an alleged scheme that involved using confidential information to trade non-fungible tokens (NFTs). His case was notable for being the first insider trading prosecution focused on digital assets.
The Court determined that the jury received incorrect instructions regarding the nature of the confidential information in question, which ultimately led to an erroneous conviction. Specifically, the court found that the confidential information — the identities of NFTs slated for showcasing on OpenSea’s homepage — did not hold commercial value for the company. This ruling clarifies the interpretation of “property” under the federal wire fraud statute, particularly in relation to digital assets and emerging technologies.
Nathaniel Chastain served as the head of product at OpenSea, an online marketplace for NFTs. In his role, he selected which NFTs would be prominently displayed on the platform, a position that typically resulted in increased sales for the chosen tokens. Chastain allegedly executed trades based on non-public information, amassing approximately $57,000 in profits prior to the selected NFTs being featured.
OpenSea itself did not engage in buying or selling NFTs or receive payments from creators for featuring their tokens. The company charged a standard transaction fee on trades conducted on its platform. The process for selecting featured NFTs was somewhat open, with input solicited from employees and the public, as the company aimed to enhance user engagement rather than secure direct economic benefits.
Chastain’s trading activities drew scrutiny when users noticed irregular transactions linked to his accounts and subsequently raised the issue on social media. Following this backlash, OpenSea requested Chastain’s resignation, which led to government charges claiming he misappropriated confidential business information for personal gain. His initial conviction resulted in a three-month prison sentence and three years of supervised release.
The Second Circuit’s decision scrutinized whether the confidential information in question constituted “property” under the wire fraud statute. The jury had been instructed that confidential business information could be classified as property, even without commercial value, and could support a conviction based solely on unethical behavior. However, the appellate court rejected this broader interpretation, asserting that confidential information must possess actual commercial value for it to qualify as property under the wire fraud statute.
The court pointed out that the information regarding featured NFTs had an ambiguous value to OpenSea, with testimony suggesting that it was not central to the company’s operations. While there were hints that disclosing such information could damage OpenSea’s reputation, the court ruled that such abstract harm did not suffice to establish a property right under the wire fraud statute.
Furthermore, the majority opinion criticized the jury’s instructions that allowed for a conviction based on merely unethical conduct. The appellate court clarified that the wire fraud statute is not designed to criminalize immoral business practices in the absence of a tangible property interest being violated. Conclusively, the court determined that erroneous jury instructions could have influenced the jury’s decision, leading to the vacating of Chastain’s convictions and remanding the case for further actions.
Dissenting in the decision, Judge José A. Cabranes argued that confidential business information should indeed be considered “property” under the wire fraud statute, irrespective of its commercial value.
The implications of the Second Circuit’s ruling are significant, as it narrows the legal definition of “property” under federal wire fraud laws. Going forward, the burden is now greater for the government to demonstrate that misappropriated confidential information possesses legitimate commercial value to secure a wire fraud conviction. This ruling could impact the prosecution of future cases involving digital assets, as many NFTs and cryptocurrencies remain outside strict regulatory classifications akin to securities.
This decision aligns with a broader judicial trend aimed at constraining the application of the federal wire fraud statute, emphasizing that not all non-public information is protected under fraud laws. Companies are advised to assess the true commercial value of their confidential information and to ensure that their governance practices reflect these legal distinctions. For those in the digital asset space, revising compliance policies may be essential to focus on information that poses a tangible risk of economic harm if misused.
