Former Hydrogen CEO Seeks Lighter Sentence in Crypto Market Manipulation Case
On Monday, April 29, 2024, Michael Kane filed a sentencing memorandum requesting a sentence below the U.S. Sentencing Guidelines range for his role in a cryptocurrency market manipulation conspiracy.
Kane, the former CEO of Hydrogen Technology Corporation, pled guilty to conspiracy and securities fraud charges related to his company’s agreement to hire Moonwalkers Trading Limited, a firm founded and operated by Tyler Ostern, to artificially increase trading volume in Hydro, a cryptocurrency created by Hydrogen.
In the memorandum, Kane’s attorney argues the court should sentence him to time served and three years probation, including six months of home confinement. This is below Kane’s guideline range, but more punishment than co-conspirator Andrew Chorlian received for a similar role in the scheme.
The defense filing objects to several aspects of Kane’s pre-sentence report, including loss calculations, the number of victims, and proposed enhancements for sophisticated means, role in the offense and obstruction of justice.
On the issue of loss, the defense argues the government failed to prove any actual losses resulted from the conspiracy. An expert analysis conducted by Jeremy Cusimano estimates maximum potential losses of around $33,000. However, the defense contends general market volatility and individual token sales by Chorlian likely impacted prices more than the manipulation scheme.
The memorandum also challenges the report’s finding that the offense involved 10 or more victims. The defense claims only two individuals were proven to rely on inaccurate volume data when purchasing Hydro. Information is lacking on the other alleged victims regarding identities, connection to conspirators, and whether losses resulted from intervening factors.
If the court finds no actual loss occurred, Kane should receive no enhancement for that guideline factor, according to the filing. It notes other courts have declined to apply loss enhancements despite fraud convictions when no losses were proven.
The defense memorandum provides context on Hydrogen’s launch of Hydro to complement its blockchain technology platform. It asserts Kane did not intend to perpetrate fraud but sought to decentralize token ownership. However, pressure to distribute the remaining tokens led to the illegal agreement with Ostern, whose firm specialized in manipulation.
The filing cites Kane’s lack of personal profit from the scheme compared to Chorlian and argues the lifelong impacts of job loss, debt from SEC settlements, and responsibility for his special needs brother amount to sufficient punishment already imposed. Considering these factors and the need to avoid unwarranted sentencing disparities, the defense believes time served is a fair sentence.
Please contact BlockTribune for access to a copy of this filing.
