SEC Wins Lawsuit Against Hydrogen Technology Corporation Over Crypto Price Manipulation

News | April 27, 2023 By:

On Thursday, April 20, 2023, the US Securities and Exchange Commission (SEC) won a lawsuit against Hydrogen Technology Corporation and its former CEO Michael Ross Kane over market manipulation of crypto asset securities.

On Sept. 28, 2022, the securities regulator filed a complaint in the United States District Court for the Southern District of New York, accusing Kane of manipulating the price of its ERC-20 token, Hydro.

“Starting in January 2018, Kane and Hydrogen, a New York-based financial technology company, created its Hydro token and then publicly distributed the token through various methods: an “airdrop,” which is essentially giving away Hydro to the public; bounty programs, which paid the token to individuals in exchange for promoting it; employee compensation; and direct sales on crypto asset trading platforms,” the complaint stated. “The complaint further alleges that, after distributing the token in those ways, Kane and Hydrogen hired Moonwalkers, a South Africa-based firm, in October 2018, to create the false appearance of robust market activity for Hydro through the use of its customized trading software or “bot” and then selling Hydro into that artificially inflated market for profit on Hydrogen’s behalf. Hydrogen allegedly reaped profits of more than $2 million as a result of the defendants’ conduct.”

Last week, a New York District Court judge ruled in favor of the SEC, ordering Hydrogen Technology to pay a total of $2.8 million in fines and remediation.

“Defendant Hydrogen shall pay the total of disgorgement, prejudgment interest, and penalty due of $2,796,235.51 in four (4) installments to the Commission according to the following schedule: (]) $696,235.51, within 30 days of entry of this Final Judgment;(2) $700,000, within 120 days of entry of this Final Judgment; (3) $700,000, within 240 days of entry of this Final Judgment; and (4) $700,000, within 360 days of entry of this Final Judgment,” the order said. “Defendant Kane shall pay the total of disgorgement, prejudgment interest, and penalty due of $260,206.04 in twelve (12) installments to the Commission.”

The judge also prohibited both Hydrogen and Kane from participating in further offerings of cryptocurrencies.

“Defendants Hydrogen and Kane each are permanently restrained and enjoined from participating, directly or indirectly, including, but not limited to, through any entity controlled by defendants, in any offering of crypto asset securities, provided, however, that such injunction shall not prevent Kane from purchasing or selling crypto asset securities for his own personal account,” the order said.

A copy of the original filing can be found here.