The logo of non-fungible token (NFT) marketplace OpenSea is seen through a magnifying glass amid NFT items displayed on its website, in this illustration picture taken February 28, 2022. REUTERS/Florence Lo

(Reuters) - A former employee at non-fungible token marketplace OpenSea has asked a federal judge in New York to dismiss charges that he engaged in insider trading, saying prosecutors stretched the law to "plant a flag in the blockchain industry."

Former OpenSea product manager Nathaniel Chastain was charged in June with wire fraud and money laundering over allegations that he secretly bought NFTs he had chosen for OpenSea's home page, and sold the tokens at a profit once they had been featured. The case was the first to allege insider trading in digital assets. Chastain has pleaded not guilty.

In a motion to dismiss the case on Friday, Chastain argued prosecutors' theory that he misappropriated his own ideas about what should go on the homepage would "criminalize run-of-the-mill civil employment disputes."

"The government would have this court believe that if an employee is at work, has a thought, and then acts in accordance with that thought, then the employee’s thought—in and of itself—is the property of his employer," his attorneys wrote.

A spokesperson for the U.S. attorney's office declined to comment.

The wire fraud statute outlaws schemes to obtain property, and the U.S. Supreme Court has increasingly limited what falls in that category, Chastain said. He...

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