The New York Council of Defense Lawyers (NYCDL) is arguing that federal prosecutors are overreaching in the case of a former Open Sea employee accused of carrying out an insider trading scheme involving non-fungible tokens (NFTs).
Nathaniel Chastain was charged in May with money laundering after the U.S. Department of Justice (DOJ) said he used anonymous accounts on Open Sea to mask his identity. His alleged activities were spotted by the NFT community, who traced his transfers and funds back to his public account.
Read more: DOJ Charges Ex-OpenSea Employee in NFT Insider Trading Scheme
But as The Wall Street Journal reported Wednesday (Aug. 31), the NYCDL — an industry advocacy group — says prosecutors have taken a case of workplace misconduct and turned it into a felony, and is asking a judge to dismiss the case.
The DOJ alleges Chastain broke the law by stealing confidential information from his former employer, although he was also charged with money laundering.
Allowing the case to proceed could “massively expand wire fraud to capture all sorts of workplace indiscretions” that might not even get an employee in trouble, let alone prosecuted, the NYCDL said.
The group argues that if prosecutors prevail in their case against Chastain, it could open the door to future criminal action against employees who use work information elsewhere, like a whistleblower showing company information to a reporter.
See also: Academic Study Finds Signs of Insider Trading at Crypto Exchange Coinbase Global
This summer has also seen the DOJ file charges in what it says is its first-ever case of insider trading involving cryptocurrency, involving a former manager for Coinbase and two other men who were charged with wire fraud conspiracy and wire fraud.
Weeks later, a study at The University of Technology Sydney found that insider trading at Coinbase could be more widespread, saying research estimated that between 10% and 25% of Coinbase listings since 2018 showed signs of insider trading.
Coinbase responded that it takes allegations of frontrunning seriously and works hard to make sure market participants all have the same information.
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