US prosecutors will not retry their wire fraud and money laundering case against a former manager at the nonfungible token platform OpenSea, following a federal appeals court's July reversal of the convictions.
On Wednesday, prosecutors told a Manhattan federal court that they entered into a one-month deferred prosecution agreement following the appeals court ruling, after which the case will be formally dismissed.
In a letter, Manhattan US Attorney Jay Clayton, a former SEC chair, said the decision was made based on Chastain already serving parts of his initial sentence, including three months behind bars, and that he agreed not to contest the forfeiture of 15.98 Ether (ETH) worth $47,330 that that prosecutors alleged was obtained through the scheme.
“The interest of the United States will be best served by deferring prosecution of this matter and not retrying the case,” Clayton wrote.
A jury convicted Chastain of wire fraud and money laundering in 2023, with prosecutors accusing him of using his knowledge to buy NFTs that would be featured on OpenSea’s website and later selling them after their prices jumped from being featured.
Jury given flawed instructions, says appeals court
Chastain was sentenced to three months in prison and fined $50,000, but a federal appeals court overturned the conviction in July, ruling that the jury was improperly instructed and that NFT homepage data without commercial value isn’t property under federal wire fraud laws.
The case marked the first digital asset insider trading case in US history and crypto backers have cited the overturned conviction to push for clearer legislation to define how digital assets fit within existing laws.
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Chastain will not be supervised by US Pretrial Services and can apply to seek the return of the $50,000 fine and $200 special assessment that he paid following his initial conviction in May 2023.
Chastain’s case adds to a growing list of crypto-related investigations, lawsuits, and prosecutions that the Justice Department and regulators have dropped for procedural or evidentiary reasons.
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