Two Hydrogen Technology executives, Michael Kane and Shane Hampton, have been sentenced to prison for their involvement in inflating the value of the company’s cryptocurrency, HYDRO. The U.S. Department of Justice (DOJ) stated that Kane, the co-founder and CEO of Hydrogen Technology, and Hampton, the Head of Financial Engineering, were responsible for orchestrating cryptocurrency securities fraud and wire fraud schemes.
The accused individuals allegedly hired the South African market-making firm, Moonwalkers Trading Limited, to manipulate the price of HYDRO on a U.S.-based crypto exchange. They utilized a trading bot to flood the market with fake and fraudulent orders between October 2018 and April 2019. As a result, they executed approximately $7 million in wash trades and $300 million in spoof trades, ultimately profiting around $2 million from the sale of HYDRO.
This case marks the first criminal jury trial where cryptocurrency has been recognized as a security, and manipulating cryptocurrency prices is considered securities fraud. The DOJ stated, “The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law. Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security.”
Kane has been sentenced to three years and nine months in prison, while Hampton will serve two years and 11 months behind bars.
