NFT Insider Trading Defendant Says, by Definition, Charges Must Be Dropped

Ex-OpenSea exec calls for NFT “insider trading” charges to be dismissed—because NFTs are not securities or commodities

The Justice Department filed money laundering charges in June against Nate Chastain, the former head of product at the most popular NFT marketplace OpenSea, in what the agency called the “first ever digital asset insider trading scheme.

But in a motion filed Friday in New York federal court, Chastain asked a judge to dismiss the charges ahead of the trial based on what his lawyers argue are flaws in the DOJ’s case against him. He argues that he should not be charged because NFTs don’t fit the definition of either securities or commodities—terms that form a key part of the wire fraud and money laundering statutes that Chastain allegedly violated.

Hackers Used Deepfake of Binance CCO to Perform Exchange Listing ScamsHackers and scammers are refining their methods by including more technological tools in their schemes. Binance chief communications officer (CCO), Patrick Hillmann, reported last week about a new and sophisticated way in which attackers have used his image to perform a listing scam operation.

Hillmann stated that hackers managed to program an AI (artificial intelligence) hologram of him, a kind of deepfake that was used to scam representatives of several cryptocurrency projects in Zoom calls. The hologram was able to fool these projects into believing that they were being considered for listing on Binance and that Hillmann was part of this operation.

The listing scheme was discovered when these members contacted Hillmann to thank him for his help in the alleged listing opportunities. However, he had no knowledge of these meetings because he is not part of the listing process at Binance.

Wire fraud: the most powerful law in crypto right now

My previous article in February 2022 highlighted how DOJ could seek to use the wire fraud statute to prosecute rug pulls (i.e., take the money and run schemes), insider trading, and the market manipulation of digital assets. (See McGinley, “Expect indictments in the NFT space soon,” Reuters Legal News (Feb. 4, 2022)).

Since then, DOJ has used wire fraud to prosecute the first two rug pulls involving NFTs and to prosecute two digital asset insider trading cases. DOJ has not recently used wire fraud in a large-scale market manipulation case, but it is likely to be a next area of focus, given public reports of market manipulation and spoofing (creating orders with the intent to cancel) by crypto whales, who are individuals or entities that own substantial amounts of a particular cryptocurrency.

This article examines DOJ’s use of the wire fraud statute during the first half of 2022 and what to expect going forward.

Tether, a top crypto company, defies U.S. sanctions on service that hid stolen assets

One crypto company that has attracted scrutiny from U.S. regulators and law enforcement in the past, Tether, may be in violation of Treasury’s new rules. According to a Washington Post analysis of data from Dune Analytics, a crypto intelligence firm, Tether is not blacklisting accounts associated with Tornado Cash.

So far, the U.S. government has not taken action. “Tether has not been contacted by U.S. officials or law enforcement with a request” to freeze transactions with Tornado Cash, Tether’s chief technology officer, Paolo Ardoino, said in a statement, adding that the company “normally complies with requests from U.S. authorities.”

Coinme Brings DOGE, ETH, MATIC and More to Grocery Crypto Kiosks

Bitcoin kiosk company Coinme on Wednesday said it now sells ETH, MATIC, CHAIN, DOGE, LTC and XLM from its 10,000 grocery store kiosks.

Coinme’s integration of the six additional cryptocurrencies offers users greater freedom to interact with different tokens beyond Bitcoin, CEO Neil Bergquist said. Where some users may purchase ETH to buy an NFT, they can also purchase XLM to send across borders, its primary use case, all at one supermarket kiosk.

Detection Efforts Are Job One at the CFP Board

When Tom Sporkin joined the CFP Board as managing director of enforcement in January 2021, he was met with his fair share of challenges. Sporkin and his team are constantly trying to improve and implement the significant resources dedicated to their detection efforts, but at the end of the day, “we’re aware that we can’t find everything,” he says. “The thing that keeps me up at night is whether we’re doing absolutely everything within reason to grab relevant data and persuade people to report observations to us, because everything we do starts with detection.” Sporkin spoke to us about the lessons he’s learned, the toughest challenges he’s had to face, and why he can’t force himself to watch Showtime’s Billions.

Miami Trio Duped Banks, Crypto Exchange in $4 Million Scam, Prosecutors Say

The three men, residents of Miami, bought more than $4 million in cryptocurrency by opening accounts with a leading cryptocurrency exchange using photos of fake U.S. passports and drivers’ licenses, according to an unsealed indictment.

The accounts were linked to bank accounts controlled by the trio. After purchasing the cryptocurrency, the men quickly transferred it to cryptocurrency wallets outside of the exchange. They then called the banks and said the purchases were unauthorized, prompting the banks to reimburse them.

The 30-Year-Old Spending $1 Billion to Save Crypto

Crypto is ailing. Sam Bankman-Fried is betting a billion dollars he can fix it.

The chief executive of cryptocurrency exchange FTX Trading Ltd. has appointed himself the industry’s savior—and crypto investors are closely watching his moves after months of market carnage. This year, he bailed out a troubled digital-currency lender and tried to stabilize another. He acquired crypto exchanges in Canada and Japan. He appeared in magazine ads opposite supermodel Gisele Bündchen in a bid to keep mainstream investors enthusiastic about crypto despite the downturn.

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Mr. Bankman-Fried says his ultimate goal is to bring crypto to the masses. He wants to make FTX a household name and use the technology behind bitcoin to reinvent traditional finance, including the stock market and ordinary consumer payments.