The publicly available information confirmed in the East Eight Time Zone shows that the U.S. Department of Justice has decided not to re-examine the so-called "insider trading case" of former OpenSea product manager Nathaniel Chastain, but instead reached a deferred prosecution agreement with him. This case, from the initial conviction to the appeal, and then to the original judgment being overturned by the Second Circuit Court of Appeals on July 31, 2025, was once regarded as the "first insider trading case" in the crypto industry. The real focus of the controversy is not just the individual's fate, but whether the internal information related to the OpenSea homepage recommendation positions can be considered "property" that can be owned or infringed upon. Now, the combination of the overturned appeal and the DOJ's choice not to re-prosecute provides a highly symbolic signal for the NFT industry: regulation has not given up, but has been forced to hit the brakes on the boundary of "information as property."
From Demonstrative Hammer to Overturned Judgment: Demonstrative Effect and Decent Conclusion
● Original charges and conviction path: In the original trial, the prosecution accused Chastain of using his authority as a product manager at OpenSea to gain advance knowledge of which NFT projects would be displayed on the homepage recommendation, then buying the relevant NFTs with his personal wallet before the information was made public, and selling them for profit after the projects were recommended and prices surged. The entire chain of behavior was framed as a typical case of profiting from "confidential business information," and the court convicted him based on charges such as wire fraud, attempting to fit it into the traditional narrative framework of "insider trading."
● The deterrent of the "first crypto insider trading case": In that context, this was the first time the U.S. Department of Justice publicly prosecuted insider information abuse in the NFT field using logic similar to securities insider trading. The market generally viewed this case as a demonstrative hammer from regulators aimed at the entire crypto industry: private trading by platform employees and project parties profiting from undisclosed listing information were implicitly warned as potentially facing criminal risks. This high-pressure atmosphere, combined with the decline of the NFT boom, created a significant chilling effect.
● Appeal process and key time points: After the case entered the appeal stage, Chastain's team launched a comprehensive challenge against the legal structure relied upon for the conviction. On July 31, 2025, the U.S. Second Circuit Court of Appeals made a key ruling, overturning the original conviction, stating that the lower court had significant issues in jury instructions and in determining whether "information constitutes property." This point transformed the case from a "regulatory demonstration sample" into a "judicial reflection sample."
● From continued strong attack to deferred prosecution: After the original conviction was overturned by the higher court, the DOJ chose not to restructure the charges and force another trial, but instead turned to reach a deferred prosecution agreement with Chastain. This choice itself releases intriguing political and law enforcement signals: on one hand, the department is unwilling to take risks on a theoretical path already denied by the higher court, avoiding another loss; on the other hand, it does not want to completely "let him go home," maintaining a certain deterrent and face through the deferred prosecution, finding a relatively decent way to exit from the previous high-profile prosecution.
Wire Fraud Misfire: How the Court Denied the Logic of "Information as Property"
● Core conclusion of the ruling: Non-"ownable property": The Second Circuit Court of Appeals clearly stated in its ruling that the information regarding the OpenSea homepage selection does not constitute "property" that can be owned or stolen under the current wire fraud regulatory framework. This key statement directly severed the logical bridge that the original trial used to compare "platform recommendation arrangement information" to traditional trade secrets or tangible property, and also means that simply profiting from such internal operational information cannot be easily applied to wire fraud charges under existing statutes.
● Two legal reasons for overturning the conviction: First, jury instruction error. The appellate court found that the lower court did not sufficiently distinguish the boundary between "confidential information" and "ownable property" when explaining the relevant legal standards to the jury, leading the jury to potentially make a guilty judgment under erroneous legal premises. Second, information does not constitute property. The court further pointed out that merely because information has commercial value to the platform does not automatically equate it to property that can be stolen in the traditional sense, which directly undermined the core premise of the original conviction.
● The watershed effect of "whether information is property": Once the question of whether commercial information constitutes "property" becomes the key watershed of the case, its impact far exceeds the case itself. In the future, whether regarding contract disputes, fraud cases, or criminal cases related to so-called insider trading, prosecutors must more precisely prove whether the object of infringement is contractual benefits, specific assets, or merely abstract "opportunities" or "information advantages." Different characterizations will determine whether traditional tools like wire fraud or mail fraud can be applied, or whether new charges must be created or administrative regulatory paths relied upon.
● Amplification of the gray area of NFT platform information (to be verified analysis): Within this framework, the internal listing order, recommendation algorithms, operational data, etc., of NFT platforms have more ambiguous legal attributes: they clearly have economic value to the platform and creators, but may not be regarded as "ownable property" under current wire fraud regulations. This opens a yet-to-be-fully-clarified gray area for internal trading and the use of algorithmic ranking rights, and whether this will be filled by new legislation or other charges remains to be verified.
Serving Time and 15.98 ETH: Realistic Considerations of Deferred Prosecution
● Known boundaries of punitive elements: Public information shows that Chastain has actually served 3 months in prison and has been ordered to forfeit 15.98 ETH (approximately $47,000) as illegal gains. It is important to emphasize that the ratio of this ETH amount to the specific profit amount he allegedly made is not fully disclosed, and one should not infer his true profit scale or return rate from this. Any quantitative extrapolation made under insufficient evidence would deviate from the boundaries of fact.
● What the deferred prosecution agreement means: The so-called deferred prosecution agreement (DPA) essentially means that the prosecution decides to temporarily suspend further criminal prosecution against the defendant, rather than declaring him completely innocent. Defendants typically need to fulfill certain conditions, but in this case, aside from serving time and the ETH forfeiture, the specific terms of compliance have not been publicly disclosed, making it impossible for the outside world to determine whether there are additional compliance obligations or supervision arrangements in the future.
● The DOJ's realistic calculations: After the conviction basis was overturned by the appellate court, if the DOJ chose to retry, it would have to face the awkward risk of the previously denied wire fraud path. Rather than hitting a legal wall again, it is more pragmatic to conclude with a deferred prosecution agreement under the premise of "the defendant has served time + asset forfeiture procedures are legal," allowing them to publicly claim substantial punitive results while internally avoiding further consumption of judicial resources and political capital. This is a practical choice to maintain regulatory image after legal setbacks.
● Law enforcement signals for crypto cases: This handling method sends a complex signal to the market of "not letting either side go": on one hand, the DOJ has not completely retreated and still retains the posture to act against similar behaviors; on the other hand, it avoids continuing to shape a wire fraud theory that has been denied by a higher court into a precedent. For the crypto industry, this means: the risks remain, but the paths are unclear—platform employees and project parties cannot simply relax their vigilance based on this, but they also see that the applicability of traditional tools in new scenarios is being limited.
NFT Information Not Considered Property? Industry Self-Correction in the Gray Area
● Direct impact on project parties and platforms: The appellate ruling does not equate to declaring all internal trading behaviors "legal," but it does shake the practice of directly equating NFT homepage pre-listing information with traditional insider trading. Project parties and platforms need to reassess: employees using undisclosed homepage recommendation information to buy and sell NFTs may no longer easily fall into the criminal category centered on wire fraud, but may still trigger other fraud, breach of contract, or compliance violation issues, especially when there is a gap between disclosure obligations and user expectations.
● Cannot simply apply securities market standards: In the traditional securities market, "non-public material information" is the core dimension for defining insider trading, and regulators have long established mature standards. However, for NFTs, they have not been systematically incorporated into the same regulatory logic: whether an NFT is more like a digital collectible, a commodity, or a similar rights certificate often depends on project design and regulatory attitude. Simply copying the securities market's "materiality + non-publicity" standards into the NFT scenario currently lacks legal clarity and stable case support.
● Scope and limitations of precedent significance (to be verified): As a ruling from the appellate court, this case has certain reference value within the U.S. judicial system, but its applicability is still limited to specific facts and the text of the wire fraud regulations applied. Whether it will be proactively cited by other courts in different crypto cases, or even regarded by regulatory agencies as a basis for constructing new regulations, remains to be verified. It serves more as a "warning light"—indicating the need for greater caution in defining information attributes, rather than a definitive "amulet."
● Possible response strategies for platforms: In response to this legal signal, rational NFT platforms are likely to choose to strengthen internal information management through self-discipline, such as: refining restrictions on employees using internal data and homepage recommendation information for trading, enhancing record-keeping and auditing mechanisms; at the same time, avoiding equating themselves entirely with exchanges subject to securities-level regulation in external communications, to prevent voluntarily placing themselves into a more stringent regulatory framework. In other words, it is about finding a new balance between compliance defense and business flexibility.
From Crypto Testing Ground to Compliance Sample: Possible Paths for Future Games
● Possible new charge paths the prosecution may take (speculation): After the setback of the "information as property" wire fraud theory, in future similar cases, prosecutors are more likely to attempt to bypass property attribute disputes and instead focus on dimensions such as false statements, disclosure obligations, and fiduciary duties. For example, using whether there has been a public commitment to "fair recommendations" or "non-self-dealing transactions" as a starting point, shifting to general fraud or consumer protection clauses. This path no longer relies on the information itself being "property," but emphasizes whether the behavior violates reasonable reliance and existing commitments.
● The regulatory identity fog of NFTs and broader crypto assets: The Chastain case has only opened a small window: in the U.S. regulatory context, whether NFTs and tokens are commodities, securities, or merely digital collectibles does not have a unified answer. Different agencies may give completely different characterizations to similar assets, and questions like "is information property" or "are profits securities profits" will yield different conclusions under different frameworks. NFTs thus become part of the crypto regulatory testing ground, yet have not been classified into any clear category.
● Redrawing the red line of "using one's position for profit": For project parties, platform employees, and KOLs, what truly needs to be vigilant is not a specific charge, but the broader risk of "profiting from the use of one's position." When obtaining internal platform data, recommendation information, or undisclosed cooperation plans, if they are used for self-dealing transactions, guiding fans to buy and sell, or arranging benefit transfers, even if it does not trigger wire fraud temporarily, it may still fall under the scrutiny of other regulatory or civil liabilities. The red line is not whether you know this is "property," but whether you have abused an unequal information advantage.
● Practical insights for readers: In a stage where legal consensus has not yet formed and the significance of precedents remains to be tested, a more prudent approach is to self-regulate according to the "worst regulatory scenario": assuming that regulators may exhaust available tools for accountability, treating internal platform information as high-risk sensitive resources rather than "gray benefits" that can be arbitraged at will. Avoiding actively standing at the boundary of judicial testing is not only a protection of personal asset safety but also a basic respect for the long-term survival space of the industry.
After the Reversal: The Unfinished Business of NFT Insider Trading Rules
● A phased answer to "Is crypto information property?": The reversal of the Chastain case provides a phased and localized answer to this core question: at least under the current wire fraud regulatory framework, operational data such as the information regarding OpenSea's homepage selection is not automatically considered property that can be infringed upon. However, this conclusion is limited to specific facts and does not touch upon other legal paths; many key issues—such as how new legislation will define digital information assets—remain unresolved.
● Deferred prosecution does not equal a "get out of jail free" card: For the parties involved, the deferred prosecution agreement means temporarily stepping out of the spotlight, but it does not equate to complete exoneration. The established facts of serving 3 months in prison and forfeiting 15.98 ETH are enough to demonstrate that regulatory and judicial departments maintain a tough stance on such behaviors. For industry participants, this case should be viewed as a high-risk signal: legal paths can be overturned, but compliance baselines will not automatically be raised; hoping for a "reversal" to apply to oneself is a dangerous misjudgment.
● Future games and observation focus: Moving forward, the competition among regulatory agencies, the judicial system, and market participants regarding the attributes of NFT information, internal platform data, and employee trading rules will only intensify. This case is just a starting point, not the end. What truly deserves attention is whether new legislative attempts, regulatory guidelines, or case law will emerge to further specify the controversy of "information as property." For all participants still active in the NFT and broader crypto world, closely monitoring these practical developments is more crucial than any single "reversal" itself.
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