Two individuals have been given prison sentences for their involvement in manipulating the price of Hydrogen Technology’s cryptocurrency, HYDRO, and deceiving investors. This case is significant because it is the first time a cryptocurrency has been classified as a security in a federal criminal trial, highlighting the serious consequences of price manipulation in the crypto world.
According to court documents, Kane, the co-founder and CEO of Hydrogen Technology, and Hampton, the Head of Financial Engineering at the company, worked with Moonwalkers Trading Limited of South Africa to artificially inflate the price of HYDRO. They used an automated trading bot to carry out fake orders on a U.S.-based cryptocurrency exchange from October 2018 to April 2019. The manipulation involved approximately $7 million in “wash trades” and over $300 million in “spoof trades,” which misled investors into buying HYDRO at inflated prices, resulting in the conspirators making a profit of around $2 million.
Principal Deputy Assistant Attorney General Nicole M. Argentieri stated, “Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot to manipulate the price of their company’s cryptocurrency.” Kane pleaded guilty to multiple charges in November 2023, while Hampton was convicted by a federal jury in February 2024. The jury unanimously ruled that the sales of HYDRO were investment contracts, thus classifying the token as a security under federal securities law.
In addition to Kane and Hampton, two other individuals, Andrew Chorlian and Tyler Ostern, pleaded guilty to charges of conspiracy to commit securities price manipulation and wire fraud. They have already been sentenced for their involvement in the scheme.
Hampton, 32, of Philadelphia, received a sentence of two years and 11 months in prison, while Kane, 39, of Miami Beach, Florida, was sentenced to three years and nine months. These sentences send a strong message that price manipulation and securities fraud in the cryptocurrency market will not be tolerated and will be met with serious consequences.
The case serves as a warning to others who may be considering engaging in similar fraudulent activities in the crypto space. It also highlights the need for increased regulation and oversight to protect investors from falling victim to such schemes. Investors should exercise caution and conduct thorough research before investing in any cryptocurrency to avoid becoming victims of fraud.