Federal prosecutors won't retry their fraud claims against the former OpenSea manager accused of insider trading on his employer's nonfungible token platform, walking away from the case after the Second Circuit overturned the conviction last July.

Prosecutors told a Manhattan federal judge on Wednesday that they won't take another shot at pressing wire fraud and money laundering charges against Nathaniel Chastain.

"In light of the fact that the defendant has already served the custodial parts of the sentence that was previously imposed in this case, and because the defendant has agreed not to contest the forfeiture of the property he obtained through his buying and selling of nonfungible tokens, the government has determined that the interest of the United States will be best served by deferring prosecution of this matter and not retrying the case," the government's letter said.

The accompanying agreement will defer prosecution for one month, after which the government plans to dismiss its indictment against Chastain with prejudice. Though Chastain agreed not to contest the government's forfeiture — even though the Second Circuit vacated his conviction — he will be able to seek the return of a $50,000 fine he paid as part of his sentence.

Counsel for Chastain and the government declined to comment Thursday.

A Manhattan federal jury convicted Chastain in May 2023 after the former OpenSea product manager made roughly $57,000 buying NFTs he knew would later be featured on the crypto platform's homepage and selling them when they saw a price bump from the exposure.

While federal prosecutors called the activity insider trading, Chastain pushed back on this characterization at trial, arguing his conduct didn't involve securities or commodities trading, and the information he used to trade didn't provide any commercial value to the company. Because the information didn't have any economic value to the company and OpenSea made no attempts to keep it secret, his conduct didn't qualify as a misappropriation of company property, Chastain argued.

Chastain served a three-month sentence while he appealed to the Second Circuit, which argued the lower court wrongly instructed the jury about how to weigh the value of the information to the company. The appeals court ultimately agreed that the district court was wrong to instruct the jury that the government didn't need to prove the featured NFT information was valuable to the company for a fraud conviction, and overturned the verdict.

The case will remain open until the government files its planned motion to dismiss the indictment next month.

The government is represented by Thomas Burnett, Allison Nichols and Nicolas Roos of the U.S. Attorney's Office for the Southern District of New York.

Chastain is represented by Alexandra A.E. Shapiro and Jason A. Driscoll of Shapiro Arato Bach LLP, and David I. Miller, Daniel P. Filor, Nicholas T. Barnes and Charles J. Berk of Greenberg Traurig LLP.

The district court case is USA v. Chastain, case number 1:22-cr-00305, in the U.S. District Court for the Southern District of New York.

The appeal is United States of America v. Chastain, case number 23-7038, in the U.S. Court of Appeals for the Second Circuit.