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☆ LA media company settles first SEC enforcement case over NFTs
▼ + stars: | 2023-08-28 | by ( Jonathan Stempel | ) www.reuters.com time to read: +2 min

Signage is seen at the headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S., May 12, 2021. The SEC said Impact Theory marketed its Founder's Keys--sold in "Legendary," "Heroic" and "Relentless" tiers--as a means to profit from its business by investing at an early stage. Impact Theory allegedly raised $29.9 million by selling 13,921 Founder's Keys in late 2021, and received $978,000 of royalties from secondary sales. The SEC said Impact Theory also compared its NFTs with "handing ($20) to Mark Zuckerberg in his dorm room," referring to the billionaire Facebook co-founder. SEC commissioners Hester Peirce and Mark Uyeda partially dissented from Monday's settlement, saying the regulator owed investors better guidance on NFTs.

Persons: Andrew Kelly, Disney, Mickey Mouse, Willie, Mark Zuckerberg, Antonia Apps, Hester Peirce, Mark Uyeda, Peirce, Uyeda, Nathaniel Chastain, Jonathan Stempel, David Gregorio Our Organizations: U.S . Securities, Exchange Commission, SEC, Washington , D.C, REUTERS, Los, U.S, Securities, Walt Disney, Disney, Facebook, Thomson Locations: Washington ,, Los Angeles, York, Manhattan, New York

The logo of non-fungible token (NFT) marketplace OpenSea is seen through a magnifying glass amid NFT items displayed on its website, in this illustration picture taken February 28, 2022. REUTERS/Florence Lo/Illustration/File Photo Acquire Licensing RightsAug 22 (Reuters) - A U.S. judge sentenced a former product manager at OpenSea, the world's largest marketplace for non-fungible tokens (NFTs), to three months in prison on Tuesday for buying NFTs he knew would soon be featured on the site's home page. Nathaniel Chastain, 33, was convicted of fraud and money laundering in federal court in Manhattan in May for what prosecutors called the first insider trading case involving digital assets. Chastain's attorneys had asked for no prison time, saying he had already lost his reputation, job and equity in OpenSea worth millions of dollars. Prosecutors unsealed charges against Chastain in June 2022, after a boom in NFT sales saw the market grow to about $40 billion in 2021.

Persons: Florence Lo, Nathaniel Chastain, Chastain, Ishan Wahi, OpenSea, Jody Godoy, Grant McCool Organizations: REUTERS, Prosecutors, Global Inc, Court, Southern District of, Thomson Locations: U.S, OpenSea, Manhattan, Southern District, Southern District of New York, New York

☆ Ex-OpenSea Worker Found Guilty in First NFT Insider-Trading Case
▼ + stars: | 2023-05-04 | by ( James Fanelli | ) www.wsj.com time to read: 1 min

The home page of NFT marketplace OpenSea. Photo: Ariel Zambelich/The Wall Street JournalA former employee of NFT marketplace OpenSea was found guilty Wednesday of what federal prosecutors described as the first insider-trading case involving digital tokens, marking a win for the Justice Department in its push to police the crypto industry. A federal jury in New York convicted Nathaniel Chastain of wire fraud and money laundering for using nonpublic information from his employer to trade on nonfungible tokens in 2021. The Manhattan U.S. attorney’s office charged Mr. Chastain in 2022, accusing him of purchasing the NFTs ahead of OpenSea’s featuring them on its home page. Once the NFTs spiked in value after being featured, Mr. Chastain sold them, pocketing tens of thousands of dollars in profit, prosecutors said.

The case could have broader implications for assets that do not fit in to existing regulations preventing investment advisers, brokers and others from trading on material nonpublic information, legal experts have said. "You can't hold Nate to a standard that didn't exist," his lawyer Daniel Filor told jurors in his closing argument on Monday. "Nobody told Nate that he couldn't use or share that information." Prosecutor Allison Nichols said Chastain used anonymous OpenSea accounts to make the illegal trades, showing he knew what he was doing was wrong. "He hid what he was doing," Nichols told the jury in her rebuttal argument.

Companies Ozone Networks Inc FollowNEW YORK, May 1 (Reuters) - A former employee of OpenSea, the world's largest marketplace for non-fungible tokens (NFTs), used inside knowledge of which assets would be featured on its homepage to make "free money," a prosecutor said on Monday as an insider trading trial wound to a close. Prosecutors have called it the first criminal insider trading case involving such assets. Prosecutor Thomas Burnett said in his closing argument that Chastain chose which NFTs to feature, and then profited illegally by selling his tokens shortly thereafter. They have said that his actions were not insider trading, and that the information he accessed was not OpenSea's property and had no inherent value to the company. Reporting by Luc Cohen in New York; Editing by Noeleen Walder and Conor HumphriesOur Standards: The Thomson Reuters Trust Principles.

☆ First-Ever NFT Insider-Trading Case Heads to Trial
▼ + stars: | 2023-04-24 | by ( James Fanelli | ) www.wsj.com time to read: 1 min

OpenSea is the largest online marketplace of nonfungible tokens. Photo: Ariel Zambelich/The Wall Street JournalThe first-ever trial involving alleged insider trading of digital tokens kicks off in a New York federal court Monday, a test of how the Justice Department applies age-old laws to a new and lightly regulated industry. The defendant, Nathaniel Chastain , is a former employee of OpenSea, the largest online marketplace of nonfungible tokens, and his case turns on whether he used confidential information to purchase NFTs ahead of the company featuring them on its home page.

It is considered the first criminal insider trading case involving such assets. "He abused that position of trust," prosecutors said in an April 4 filing. He added that if prosecutors mention insider trading, "there is a substantial danger of undue prejudice and confusion of the jury." "Is it insider trading of anything?" "If this case sticks, there is precedent that insider trading theory can be applied to any asset class."

☆ Analysis: Bankman-Fried fraud charges sidestep debate over how U.S. law sees crypto
▼ + stars: | 2023-01-09 | by ( Luc Cohen | Thomson Reuters | Reports On The New York Federal Courts. Previously Worked As A Correspondent In Venezuela | ) www.reuters.com time to read: +5 min

"It's a pretty simple deception," said Shane Stansbury, a professor at Duke University School of Law and former Manhattan federal prosecutor. The debate matters to cryptocurrency companies because it could determine which agency regulates the trading of digital assets. Both have pleaded not guilty and argued the charges should be dismissed because insider trading charges must involve securities or commodities. In bringing wire fraud charges in both cases, prosecutors avoided taking a position on how cryptocurrencies or NFTs should be classified. It is unlikely Bankman-Fried's lawyers will attempt a similar argument because the wire fraud charges are more straightforward, Kasten said.

☆ NFT Prosecution Sparks Debate Over Insider-Trading Label for Digital-Token Cases
▼ + stars: | 2022-10-27 | by ( James Fanelli | Corinne Ramey | ) www.wsj.com time to read: 1 min

Insider trading typically evokes the idea of a well-connected investor using secret information to profit from stock trades. Now, a federal judge has allowed the Justice Department to use the same kind of narrative in a first-ever case about the trading of digital tokens—even though prosecutors didn’t bring traditional insider-trading charges. The use of insider-trading language emerged as a flashpoint in the New York case, which the Justice Department says is its maiden prosecution for insider trading of NFTs, or nonfungible tokens, which are digital proofs of purchase for goods such as art. Prosecutors allege a former employee of NFT marketplace OpenSea profited from nonpublic information by purchasing tokens that he knew would soon be featured on OpenSea’s home page. The defendant, Nathaniel Chastain, knew the tokens would rise in value after being showcased, prosecutors say.

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