A pretrial hearing is scheduled today in the Nathaniel Chastain “insider trading” criminal case. As I previously blogged, this case is currently scheduled for a jury trial on April 24, 2024. In keeping with the court’s scheduling order, the parties filed a slew of pretrial motions on April 13th, including proposed jury instructions. Cryto Criminal Defense Lawyer Blog
Back in June of 2022, the U.S. Attorney for the S.D.N.Y. returned an Indictment charging Chastain, a former product manager at OpenSea with wire fraud and money laundering in connection with a scheme to commit insider trading in Non-Fungible Tokens, or “NFTs,” by using confidential information about what NFTs were going to be featured on OpenSea’s homepage for his personal financial gain. The Indictment specifically alleges that from in or about June 2021 to in or about September 2021, Chastain engaged in “insider trading” of Non-Fungible Tokens (“NFTs”).
On motion of particular interest is the defense’s motion in limine to exclude the government from mentioning the term “insider trading” before the jury during the trial (Doc. 81).
The defense argues that the terms "insider trading" and "front running" are irrelevant to the prosecution as they relate to crimes in the financial markets, not the alleged trading of non-fungible tokens (NFTs) by Chastain. As a consequence, their use at trial by the government would be unduly inflammatory, prejudicial to the defendant, and confusing to the jury.
The motion cites prior cases in which courts have precluded litigants from using “pejorative terms” when such categorizations were inflammatory and unnecessary to prove a claim. For instance, the term "insider trading" has historically been understood in reference to securities or commodities violations, while "front running" has been described as a securities or commodities-specific act. These terms are not to be used lightly, as they describe a highly specific variety of criminal conduct that has not been alleged in this case.
The court previously denied the defense’s motion to strike the term “insider trading” from the Indictment as “surplusage.” (Doc 31). Motions to strike surplus language from the indictment are rarely granted unless the court makes a clear finding that information in indictment is irrelevant and the surplusage is prejudicial or inflammatory in nature.
The defense now argues that the question of the term's suitability at trial presents a different issue, considering the potential for jury confusion. The defense argues most people associate "insider trading" with securities fraud, and it is likely that the jury would make a similar association. This could lead to the erroneous conflation of Mr. Chastain's alleged conduct with that of a high-powered Wall Street executive or trader in a highly regulated industry.
The defense contends that there are more accurate, yet less prejudicial descriptors available, and that the terms "insider trading" and "front running" should not be used in questioning or testimony during the trial. They request that the court grant the motion in limine to preclude the use of these terms to avoid undue prejudice and confusion for the jury.
It will be interesting to see how the court comes down on this issue given this may likely be the first of its kind trial for the insider trading of digital assets.
This blog post was prepared with the assistance of ChatGPT-4 AI. Nothing in this post should be considered legal advice or the creation of an attorney-client relationship. This blog is strictly for informational purposes only.