US prosecutors have officially dismissed the case against Nathaniel Chastain, a former manager at OpenSea, following a pivotal appeals court ruling that undermined the foundation of what was labeled as the first insider trading prosecution involving NFTs in the United States. The Justice Department announced a month-long deferred prosecution agreement before ultimately dismissing the indictment with prejudice.
Chastain’s legal troubles began in June 2022 when he was arrested and charged with wire fraud and money laundering for allegedly exploiting confidential information to purchase NFTs before they were prominently displayed on OpenSea’s homepage. The case garnered significant attention as it sought to apply established financial crime statutes to an emerging market of digital assets.
The dissolution of the prosecution stems from a July 2024 decision by the 2nd US Circuit Court of Appeals. The court found that the jury in Chastain’s trial had been incorrectly instructed, allowing for a conviction based on ethical considerations rather than proving that actual theft of property with commercial value occurred. Judge Steven Menashi ruled that the legal guidelines used were flawed because the information Chastain used did not constitute tangible property under federal wire fraud statutes. The appeals panel criticized the lower court’s instructions that permitted verdicts based on vague standards of honesty and fair play, warning that such a broad interpretation could criminalize a wide range of deceptive conduct.
Chastain had been convicted in May 2023, accused of using his insider knowledge to buy dozens of NFTs shortly before their appearance on OpenSea’s homepage, profiting between two to five times the original purchase prices. The government estimated that he earned more than $57,000 through this scheme.
US Attorney Damian Williams characterized the case as a stern warning to the digital asset community, asserting that the nature of NFTs does not exempt individuals from scrutiny for unethical behavior. The trial spanned a week, and prosecutors opted for wire fraud charges due to the absence of a legal designation classifying NFTs as securities. Over 300 defense attorneys submitted letters advocating for the dismissal of the case, arguing that criminalizing the treatment of confidential business information as property could lead to excessive legal repercussions.
This incident highlights a broader trend in federal oversight of cryptocurrency, particularly following shifts in regulatory approaches experienced during the Trump administration. Recent reports indicate a marked decrease in SEC enforcement actions related to cryptocurrencies, with the agency initiating only 13 such actions in 2025—a 60% decline from the previous year and the lowest number recorded since 2017. High-profile investigations, including those into major firms like Coinbase and Kraken, have also been dismissed.
In February 2025, the SEC concluded its investigation into OpenSea after previously issuing a Wells notice alleging the platform operated as an unregistered securities marketplace. OpenSea’s founder, Devin Finzer, characterized the closure of the investigation as a significant victory for those innovating within the NFT space.
Chastain, following the dismissal of his prosecution, is no longer under supervision by US Pretrial Services and is eligible to seek the return of a $50,000 fine and special assessment he paid following his conviction. Meanwhile, the current state of the NFT market reflects a challenging landscape, with a total market cap of $2.56 billion as of recent data—an 84.78% decline from its peak of $16.82 billion in April 2022, when interest in digital collectibles was at its height.
