A federal judge in Florida has sentenced Michael Kane, the chief executive of New York-based Hydrogen Technology Corporation, to nearly four years in prison for manipulating the price of HYDRO, a token issued by the company.
In a press release on June 25, the Justice Department announced that Shane Hampton, the head of financial engineering at Hydrogen, was sentenced to two years and 11 months in prison, while Michael Kane received a sentence of three years and nine months.
Nicole M. Argentieri, head of the Justice Department’s criminal division, stated that Hampton and Kane orchestrated a fraud scheme by using a “trading bot to manipulate the price of their company’s cryptocurrency.”
“In this case, for the first time, a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulating cryptocurrency prices was securities fraud,” Argentieri noted.
According to court documents, Michael Kane and Shane Hampton hired Moonwalkers Trading Limited, a South African firm, to manipulate the price of HYDRO on a U.S.-based crypto exchange. While the name of the exchange was not specified in the press release, prosecutors revealed that the bot employed by Moonwalkers Trading “flooded the market with fake and fraudulent orders from October 2018 to April 2019.”
Prosecutors further alleged that Kane, Hampton, and their co-conspirators conducted approximately $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO using the bot. This manipulation allowed them to make around $2 million in profits from selling HYDRO over a span of about 10 months.
In September 2022, the U.S. Securities and Exchange Commission (SEC) charged Kane and Tyler Ostern, the chief executive of Moonwalkers Trading Limited, for their roles in “effectuating the unregistered offers and sales of crypto asset securities.”
