Chastain: Pushing the Boundaries of Insider Trading

Summary

On 31 July 2025 the Second Circuit vacated the wire fraud conviction of Nathan Chastain, who traded on knowledge of which NFTs would be featured on OpenSea’s homepage. The court held that, under the wire fraud statute, an employer’s confidential information qualifies as “property” only if it has commercial value to the employer. Information valuable only to an employee for trading—but not commercially valuable to the company—does not fall within the statute’s protection.

Key Points

The Second Circuit reversed Chastain’s wire fraud conviction, finding an erroneous jury instruction on what constitutes employer “property” under 18 U.S.C. § 1343.
The court adopted a limiting rule: confidential information is “property” only if it has commercial value to the employer (not merely intrinsic or investor-relevant value).
Nathan Chastain used pre-publication knowledge of OpenSea’s “featured NFT” selections to make about $57,000 by buying NFTs before they were listed and selling after they were featured.
The District Court had allowed conviction based on confidentiality and departures from “fundamental honesty and fair play” without requiring proof of economic value to OpenSea.
The Second Circuit found the featured-NFT information tangential to OpenSea’s commercial activities and therefore lacking the necessary commercial value.
Judge Cabranes dissented, arguing exclusive use by the company — not separate proof of commercial value — suffices to make confidential information “property.”
Chastain may influence criminal securities prosecutions under 18 U.S.C. § 1348 and could complicate civil Rule 10b-5 misappropriation claims if courts adopt the Second Circuit’s commercial-value test.
Companies should consider documenting which categories of information they treat as confidential and economically valuable to strengthen protection and enforcement options.

Content Summary

The case arose from Chastain’s role at OpenSea selecting NFTs for a homepage feature that typically boosted an NFT’s market price. Prosecutors charged him with wire fraud (and related money laundering) rather than securities offences, likely to avoid proving NFTs were “securities.” At trial, OpenSea executives described the featured section as confidential but also said OpenSea did not trade featured NFTs.

The Second Circuit analysed Supreme Court precedent on the wire fraud statute and concluded that not all confidential business information is a traditional property interest. Relying on cases like Carpenter and Grossman, the court determined the relevant inquiry is whether the information has commercial value to the company. Because the featured-NFT information was not commercialised and was merely promotional, the court found it lacked the necessary commercial value and vacated the conviction, noting jury indications the verdict rested on perceived unethical behaviour rather than proof of property misappropriation.

The decision carries potential ripple effects: the court has previously used a common definition of “property” across wire and securities fraud statutes, so Chastain’s reasoning could be invoked in criminal securities cases and may complicate civil Rule 10b-5 misappropriation claims that do not explicitly hinge on the word “property.”

Context and Relevance

Chastain narrows the scope of criminal liability under wire fraud by injecting a commercial-value requirement for employer “property.” That narrowing may make prosecutions of insider trading for crypto/NFTs and certain shadow-trading scenarios harder, and it raises square questions for civil enforcement under Rule 10b-5 and its CFTC analogue. If courts adopt the Second Circuit’s test more broadly, regulators and plaintiffs may need to reframe misappropriation theories or rely more heavily on duties and exclusivity arguments rather than a property-based approach.

For in-house and outside counsel, the ruling suggests practical steps: clearly identify and document which categories of information the company treats as economically valuable, sharpen confidentiality agreements, and reassess compliance monitoring and employee trading policies—especially in firms handling byproduct or promotional data that could nonetheless entice traders.

Why should I read this?

Short version: this decision could flip how prosecutors and regulators build insider-trading cases — especially in crypto, NFTs and “shadow trading” matters. If you work in enforcement, compliance or corporate counsel, it’s worth a quick read because it changes what counts as a company’s “property” and gives defence teams a fresh angle. Saves you time: we read the opinion so you don’t have to dig through the whole judgment straight away.