In July 2025, the Second Circuit Court of Appeals issued its ruling in United States v. Chastain, finding that a defendant can only be convicted of insider trading if the object of their fraudulent scheme was to obtain property that had “commercial value” to its owner. The case arose from allegations of insider trading in which the defendant had been convicted of misappropriating confidential information belonging to his employer and using that information for personal gain. However, whereas most insider trading cases are charged as securities fraud, this one was charged under the federal wire fraud statute, presumably so prosecutors could avoid having to address whether the digital assets at issue were securities. The ruling also has potential implications for federal sentencing in future white-collar cases, as it limits the types of property interests that can support a wire fraud conviction.
Ultimately, the Second Circuit reversed the conviction, substantially narrowing the extent to which wire fraud charges can be filed when an employee misuses confidential information. Specifically, the court found that the prohibition against misappropriating an employer’s property under federal wire fraud statutes extends only to property that has “commercial value.”
Furthermore, because federal statutes that prohibit securities fraud and wire fraud share a common definition of “property,” the decision could have a wide-ranging impact on federal prosecutions for securities fraud and could influence how loss amounts are calculated at federal sentencing.
Nathan Chastain was a former product manager at OpenSea, an online marketplace for non-fungible tokens (NFTs). He was responsible for selecting which NFTs to feature on OpenSea’s homepage. NFTs selected for promotion typically increased in value once they were posted. Chastain allegedly took advantage of this corresponding rise in value, making approximately $57,000 through 15 NFT transactions that were purchased before they were featured on the OpenSea website.
Once the trades were discovered, Chastain was charged with one count of wire fraud, and one count of money laundering predicated on the wire fraud charge. Notably, federal prosecutors did not charge Chastain with securities fraud, presumably to avoid having to prove that NFTs are “securities” under the federal wire fraud statute.
Chastian was convicted of one count of wire fraud and one count of money laundering. He appealed, claiming the jury instructions were erroneous “because the government failed to establish that the featured NFT information was OpenSea’s property and because the jury may have convicted him based on conduct that it found to be unethical rather than fraudulent.”
In federal wire fraud prosecutions, it is well-settled law that employees are prohibited from misappropriating an employer’s “money or property” for personal gain. “Money or property” refers to both “tangible” and “Intangible” property rights, including “confidential information acquired or compiled by a corporation in the course and conduct of its business [and] to which the corporation has the exclusive right and benefit, and which a court of equity will protect through the injunctive process or other appropriate remedy.”
However, the wire fraud statute applies only to “traditional property interests” that “ha[ve] long been recognized as property.” The question in Chastain, then, was whether a company’s confidential information qualifies as “property” in the traditional sense.
Overturning Chastain’s conviction, the Second Circuit found that the “featured NFT information was so tangential to OpenSea’s business that it lacked commercial value to the company.” Because the featured NFT information was not commercialized and was intended solely to help NFT projects gain attention, the court reasoned that it lacked commercial value.
While Chastain’s actions could harm OpenSeas’s reputation, that harm was speculative: there was no evidence that not trading on this information was necessary to maintain the business. Furthermore, because jury notes suggested that Chastain was convicted due to his unethical actions (even though the trades were based on information that did not have commercial value to OpenSea), the court found reversible error. Without proof of misappropriation of a traditional property interest, Chastain’s unethical conduct was insufficient to support a conviction.
The Second Circuit’s decision in the Chastain Ruling is significant because wire fraud prosecutions the government must now prove that the victim was deprived of property that had commercial value to them. While the United States Supreme Court recently held, in Kousisis v. United States, 605 U.S. ___, No. 23-909 (May 22, 2025), that the government is not required to prove economic loss to the victim in wire fraud cases, the Chastain case should be viewed as a silver lining to the Kousisis cloud, in that, at a minimum, the property at issue must have commercial value even though the government need not prove an actual loss.
Hope Lefeber has been defending people charged with securities fraud, wire fraud, and other federal white-collar crimes for over 30 years. She represents executives, professionals, businesspeople, and individuals from all walks of life who are under investigation or have been charged with crimes in federal court. Contact the federal defense law office of Hope Lefeber today. Consultations are free and confidential.
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