US prosecutors have decided not to retry their wire fraud and money laundering case against Nathaniel Chastain, a former product manager at NFT marketplace OpenSea, following a federal appeals court ruling that overturned his conviction earlier this year.
The Justice Department confirmed on Wednesday that it entered into a one-month deferred prosecution agreement with Chastain in Manhattan federal court. Once that period expires, the case will be formally dismissed, bringing an end to one of the earliest high-profile criminal cases tied to the NFT market.
In a letter submitted to the court, Manhattan US Attorney Jay Clayton said the government determined that retrying the case would not serve the public interest, citing both the appeals court decision and the time Chastain has already served.
Chastain spent three months in prison following his original sentencing and agreed not to contest the forfeiture of 15.98 ether, valued at roughly $47,000, which prosecutors previously alleged was connected to the conduct at issue.
“The interest of the United States will be best served by deferring prosecution of this matter and not retrying the case,” Clayton wrote.
Conviction overturned over jury instructions
Chastain was convicted by a jury in 2023 on charges of wire fraud and money laundering. Prosecutors accused him of exploiting his position at OpenSea by purchasing NFTs shortly before they were featured on the platform’s homepage, then selling them after prices rose following the exposure.
The case was widely framed at the time as the first criminal insider trading prosecution involving digital assets in the United States, drawing close attention from both regulators and the crypto industry.
That narrative shifted in July, when a federal appeals court overturned the conviction. The court ruled that jurors had received flawed instructions and found that information about which NFTs would be featured on OpenSea’s homepage did not constitute “property” under federal wire fraud statutes.
The ruling effectively undercut the legal theory prosecutors relied on, raising questions about how existing fraud laws apply to digital assets and platform-specific data.
Financial penalties and forfeiture remain unresolved
While the prosecution will be dropped, Chastain will not automatically recover all penalties imposed after his original conviction. Court filings indicate he may apply for the return of a $50,000 fine and a $200 special assessment paid in May 2023, though those matters will be handled separately.
He will not be subject to supervision by US Pretrial Services following the dismissal.
The deferred prosecution agreement also requires Chastain not to challenge the forfeiture of the ether tied to the case, closing off further litigation over those funds.
Broader implications for crypto enforcement
Chastain’s case has become a reference point in ongoing debates over how US law should treat digital assets, NFTs, and platform-specific information. Crypto advocates and defense attorneys have pointed to the reversal as evidence that existing statutes are an imperfect fit for emerging technologies.
The decision not to retry the case adds to a growing list of crypto-related prosecutions and enforcement actions that have been dropped or narrowed due to procedural issues, evidentiary challenges, or evolving interpretations of federal law.
Tanya Petrusenko
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