Commercial-Value Limitation on Confidential Information as “Property” Under § 1343:
Commentary on United States v. Chastain, No. 23-7038 (2d Cir. July 31 2025)
1. Introduction
United States v. Chastain is the Second Circuit’s first published opinion to squarely hold
that confidential business information is “property” for purposes of the federal wire-fraud
statute only if it possesses commercial value to the putative victim.
The ruling vacates the conviction of Nathaniel Chastain—former Head of Product at
OpenSea—for wire fraud and money laundering based on his clandestine trading in non-fungible
tokens (“NFTs”). The panel (Judge Menashi writing; Judges Wesley concurring and Cabranes
dissenting in relevant part) concludes that the district court’s jury instructions
erroneously permitted conviction where Chastain merely misused information that
OpenSea treated as confidential yet lacked any real economic significance to the platform.
The decision crystallises two key issues:
- Whether
§1343 reaches intangible business interests detached from
“traditional” property rights; and
- The permissible breadth of “scheme to defraud” instructions after
Ciminelli (2023) and Kelly (2020).
2. Summary of the Judgment
The panel vacates Chastain’s convictions because:
- The jury was told it could deem the “featured NFT” list to be OpenSea’s
property even without proof of commercial value (property error);
- The jury was told it could find a “scheme to defraud” based merely on conduct
that “departed from traditional notions of fundamental honesty and fair
play,” a formulation the panel finds overbroad post-Ciminelli
(scheme error); and
- Those errors were not harmless given the mixed evidentiary record and a jury
note revealing uncertainty.
Evidentiary challenges (limits on employee testimony, exclusion of a contract red-line,
and exclusion of a founder’s crypto trading) are affirmed, but the convictions are
vacated and remanded.
3. Analysis
3.1 Precedents Cited and Their Influence
- Carpenter v. United States, 484 U.S. 19 (1987) – Recognised
pre-publication news as property; panel reads Carpenter as
implicitly requiring that such information have commercial value, because the
Court analogised it to trade secrets and “stock-in-trade.”
- Ciminelli v. United States, 598 U.S. 306 (2023) – Rejected the
“right-to-control” theory; emphasised that § 1343 targets only traditional
property interests. Chastain leverages Ciminelli to exclude mere “intangible
interests unconnected to property” from § 1343.
- Cleveland v. United States, 531 U.S. 12 (2000) – Licence application
not property; quoted to show statutes “protect property rights only.”
- United States v. Grossman, 843 F.2d 78 (2d Cir. 1988) – Upheld wire-fraud
conviction for stealing a client’s confidential info; panel distinguishes Grossman
because there the info’s secrecy protected the firm’s revenue.
- Skilling v. United States, 561 U.S. 358 (2010) &
Kelly v. United States, 590 U.S. 391 (2020) – Cited to reject revivified
“honest services” or morality-based theories sneaking back into wire fraud.
- Kousisis v. United States, 145 S. Ct. 1382 (2025) – Confirmed that
economic loss is not an element, but goal must be to obtain property; panel
reads it as consistent with the need for an underlying property interest.
3.2 Court’s Legal Reasoning
The opinion proceeds in three logical steps:
- Define “property.”
Drawing heavily on Ciminelli, the court states that § 1343 protects only
interests that were “long recognised as property” in 1952 when wire fraud
was enacted. Because trade-secret jurisprudence always tied protection to
commercial value, mere secrecy without value is insufficient.
- Dissect the jury instructions.
a) The charge allowed conviction where information was kept
confidential but valueless – contrary to the new commercial-value rule.
b) The “traditional honesty and fair play” language resurrected a
pre-McNally honest-services theory and thus permitted conviction for
unethical, but non-property, conduct.
- Harmless-error analysis.
Evidence that featured-NFT choices mattered little to OpenSea’s
economics (no fee differential, no internal monetisation) and the jury’s
note questioning confidentiality render the errors prejudicial.
3.3 Impact on Future Litigation
- Narrowing of wire-fraud prosecutions. Prosecutors must now show a
concrete economic interest in the confidentiality of information—e.g.,
a lost-revenue or competitive advantage nexus—before charging
misappropriation under § 1343.
- Compliance and corporate policies. Companies seeking to rely on
federal fraud statutes for protection will need to document
commercial relevance (not mere desirability) of any information they label
“confidential.”
- Digital-asset and platform cases. The opinion is especially salient
for crypto/NFT platforms where business models differ from traditional
broker-dealer paradigms; selective-listing information may fail the
commercial-value test.
- Jury-instruction templates. Model charges must excise “departure
from honesty” language and explicitly require property or money as the
object of fraud.
- Split with other circuits. Judge Cabranes’s dissent forecasts possible
Supreme Court review. If other circuits follow Carpenter/Grossman alone,
the value-requirement could create a circuit split.
4. Complex Concepts Simplified
4.1 “Property” in Fraud Statutes
Under § 1343, you are guilty only if you sought someone else’s money or property.
“Tangible” property is physical stuff; “intangible” property includes rights with economic
worth—e.g., patents, trade secrets, contractual payments. The Second Circuit now says
confidential information sits in that second bucket only if it affects the owner’s
bottom line.
4.2 “Trade Secret” vs. Mere Confidentiality
All trade secrets are confidential, but not all confidential items are trade secrets.
A trade secret (Restatement §39) must:
- Be secret (not generally known);
- Have economic value from that secrecy; and
- Be subject to reasonable steps to keep it secret.
Chastain says OpenSea had secrecy steps (NDA) but no economic value; therefore the
information was not “property.”
4.3 “Scheme to Defraud” Post-Ciminelli
The Supreme Court has steadily confined “fraud” to obtaining someone’s property
through deceit. Moral wickedness, regulatory non-compliance, or bad-faith
policy decisions are not federal fraud unless property is targeted.
5. Conclusion – Key Takeaways
- The Second Circuit establishes a commercial-value prerequisite for treating
confidential information as property under the wire-fraud statute.
- Jury instructions invoking broad morality, “honesty,” or fiduciary-like notions
risk reversible error after Ciminelli.
- Evidentiary discretion remains with trial courts, but the sufficiency of
property-related proof will be scrutinised de novo.
- United States v. Chastain is poised to reshape white-collar prosecutions in
the Second Circuit, particularly in tech-platform contexts, and may invite
Supreme Court clarification given Judge Cabranes’s pointed dissent.