United States v. Chastain

United States v. Chastain

Opinion

MEMORANDUM OPINION AND ORDER

JESSE M. FURMAN, United States District Judge:

Defendant Nathaniel Chastain is charged with wire fraud and money laundering relating to his purchase and sale of Non-Fungible Tokens or "NFTs" on OpenSea, an online NFT marketplace. ECF No. 1 ("Indictment"), ¶¶ 1, 3. According to the Indictment, Chastain was a product manager for OpenSea and, in that role, had responsibility for selecting certain NFTs to be featured on OpenSea's homepage. Id. ¶¶ 4, 8. In general, the Government alleges, when an NFT is featured on OpenSea's homepage, the values of that NFT and NFTs made by the same creator increase. Id. ¶¶ 7-8. The Government further alleges that, between [*2]  approximately June and September 2021, Chastain purchased dozens of NFTs shortly before they (or other NFTs made by the same creator) were featured on OpenSea's homepage and, shortly after they were featured, sold them for profit. Id. ¶¶ 10, 12, 13. In making these purchases and sales, the Government alleges, Chastain "misappropriated OpenSea's confidential business information," namely knowledge of which NFTs were going to be featured when on OpenSea's homepage and, in so doing, committed wire fraud in violation of 18 U.S.C. § 1343. Indictment ¶ 13. The Government further alleges that, to conceal his involvement in buying and selling the featured NFTs, Chastain transferred funds through anonymous Ethereum blockchain accounts and new Ethereum accounts without any prior history and, in so doing, committed money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i). Indictment ¶ 15.

Chastain now moves, pursuant to Rule 12(b) of the Federal Rules of Criminal Procedure, to dismiss the Indictment on the ground that it "fails to allege the essential elements of the crimes charged." ECF No. 19 ("Def.'s Mem."), at 6 (cleaned up).¹ More specifically, Chastain makes three different arguments. First, he contends, with the support of the New York Council of Defense Lawyers ("NYCDL"), as  [*3] amicus curiae, that Count I, the wire fraud count, must be dismissed because the information that he allegedly misappropriated is not "property" within the meaning of the statute. Def.'s Mem. 11-19; see also ECF No. 20 ("Amicus Mem."), at 3-14. Second, Chastain argues that Count II, the money laundering count, must be dismissed because the Government fails to allege sufficiently two elements of the crime (namely, the concealment and financial transaction elements) and seeks impermissibly to criminalize the mere movement of money. Def.'s Mem. 20-25.² Finally, Chastain asserts that Count I, the wire fraud count, must be dismissed because an "'insider trading' wire fraud charge" requires "the existence of trading in securities or commodities." Id. at 6-11 (capitalization altered).

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