Two former Hydrogen executives have been jailed for fraud and securities manipulation relating to $HYDRO. The sentence marks the first time a jury in a federal criminal trial found a cryptocurrency was a security.
Shane Hampton and Michael Kane, two former executives of Hydrogen Technology, were sentenced to jail for securities manipulation. The executives were convicted for scheming to defraud investors by manipulating the price of the $HYDRO token.
Crypto Recognized as a Security for the First Time in the US
Today marks the first instance where a cryptocurrency was found to be a security in a US federal trial, setting a new legal precedent for upcoming related matters. Shane Hampton, head of financial engineering, and Michael Kane, CEO of Hydrogen Technology, have been sentenced to a two-year and eleven-month and three-year and nine-month stint respectively in jail for fraud and securities manipulation.
According to the US Department of Justice, the jury in a federal criminal trial found that a crypto was a security and manipulating crypto prices was securities fraud.
In its statement, the DOJ explained:
“Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot to manipulate the price of their company’s cryptocurrency.”
Court documents and evidence presented at trial revealed the duo appointed an outside firm to assist them in conducting the fraud. According to the DOJ, a South African firm, Moonwalkers Trading Limited, was enlisted to manipulate the price of $HYDRO on a crypto exchange headquartered in the US by using an automated trading bot. The bot flooded the market from October 2018 to April 2019 with fake and fraudulent orders. Evidence also revealed that Kane, Hampton and co-conspirators executed around $7 million in “wash trades” and placed over $300 million in “spoof trades” for $HYDRO using the bot.
The DOJ said the “trades were designed to, and did, fraudulent induce retail investors to purchase HYDRO.” Through manipulation and the artificially inflated prices stemming from there, Hampton, Kane and their fellow conspirators made around $2 million in profits from selling $HYDRO.
DOJ Says it Will Protect Integrity of the Crypto Market
Today’s sentence sets a new precedent in cases that question whether a crypto is a security. In its statement, the DOJ warned perpetrators, vowing it would use securities law to protect the integrity of the crypto market.
Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the DOJ’s Criminal Division, said:
“This prosecution and the sentences imposed today should serve as a warning: The Criminal Division will not hesitate to use all tools at its disposal—including the federal securities laws—to protect the integrity of cryptocurrency markets.”
In a significant win for the crypto industry this week, the US Securities and Exchange Commission said it would drop its investigation into whether Ether ($ETH) is a security. The industry has had a tough time proving cryptocurrencies are not securities. In lawsuits against Binance and Coinbase last year, the SEC named several cryptocurrencies as securities, leading to numerous exchanges delisting them.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
