Hydrogen Technology Execs Sentenced for Manipulating Price of HYDRO Token

News | July 10, 2024 By:

On Tuesday, June 25, 2024, the US Department of Justice’s Office of Public Affairs announced that two men were sentenced in federal court for their roles in orchestrating cryptocurrency market manipulation schemes.

According to a press release, Shane Hampton, 32, of Philadelphia, Pennsylvania and Michael Kane, 39, of Miami Beach, Florida conspired with others to manipulate the price of HYDRO, the cryptocurrency token created by their company Hydrogen Technology. Hampton was sentenced to two years and 11 months in prison, while Kane received a sentence of three years and nine months.

Court documents revealed that between October 2018 and April 2019, Kane as CEO and Hampton as head of financial engineering at Hydrogen Technology hired an outside trading firm called Moonwalkers Trading Limited to use automated trading software, or a “bot,” to flood the cryptocurrency market with fake orders. This artificially drove up the price of HYDRO on a US-based cryptocurrency exchange. The trading bot executed approximately $7 million in wash trades and over $300 million in spoof trades.

Wash trades and spoofing schemes are forms of market manipulation whereby non-legitimate orders are used to mislead investors into believing there is real market demand for a token when there is not. Prosecutors said Kane, Hampton, and others made $2 million in profits by selling HYDRO to retail investors at the inflated prices caused by their bot’s manipulative trades.

In another legal first, the jury in Hampton’s February 2024 trial unanimously found that HYDRO met the definition of an investment contract, making it a security regulated under federal securities law. This was the Justice Department’s first criminal prosecution where a cryptocurrency was ruled to be a security.

Both Kane and two other co-conspirators, Andrew Chorlian and Tyler Ostern, had previously pleaded guilty to conspiracy to commit securities fraud and wire fraud related to the scheme. With these sentences, the Criminal Division of the Justice Department aims to send a message that it will prosecute violations of securities laws in the cryptocurrency space.