US prosecutors abandon OpenSea insider trading case

US prosecutors will not retry their insider trading case against a former manager at nonfungible token platform OpenSea after a federal appeals court overturned the convictions in July.

On Wednesday, prosecutors told a Manhattan federal court that they entered into a deferred prosecution agreement with Nathaniel Chastain and will dismiss their case after the agreement ends in a month.

In a letter, Manhattan US Attorney Jay Clayton said the decision was made based on Chastain already serving parts of his initial sentence, including three months behind bars, and that he agreed not to contest the forfeiture of 15.98 Ether (ETH) worth $47,330 that he allegedly made from insider trades.

“The interest of the United States will be best served by deferring prosecution of this matter and not retrying the case,” Clayton wrote.

An excerpt of Jay Claytons letter detailing the deferred prosecution agreement with Nathaniel Chastain. Source: PACER

A jury convicted Chastain of wire fraud and money laundering in 2023, with prosecutors accusing him of using his knowledge to buy NFTs that would be featured on OpenSeas website and later selling them after their prices jumped from being featured.

Jury given flawed instructions, says appeals court

Chastain was sentenced to three months in prison and a $50,000 fine, but a federal appeals court overturned the conviction in July, ruling that the jury was improperly instructed and that NFT homepage data without commercial value isnt property under federal wire fraud laws.

The case marked the first digital asset insider trading case in US history and crypto backers have cited the overturned conviction to push for clearer legislation to define how digital assets fit within existing laws.

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Chastain will not be supervised by US Pretrial Services and can apply to seek the return of the $50,000 fine and $200 special assessment that he paid following his initial conviction in May 2023.

Chastains case adds to a growing list of crypto-related investigations, lawsuits, and prosecutions that the Justice Department and regulators have dropped under the Trump administration, which has promised to deregulate the sector.