- A US federal jury has ruled that HYDRO, the token linked to Hydrogen Technology, is a security
- The jury has found that the HYDRO token’s CEO and co-conspirators manipulated its price
- Shane Hampton has been sentenced to nearly three years in prison, and Michael Kane to almost four years
The jury in a US federal court has ruled that HYDRO, the token associated with the Hydrogen Technology crypto project, is a security. In a first-of-its-kind ruling, the jury found that the HYRDO token constituted a security and that its CEO manipulated the token’s price along with co-conspirators. Shane Hampton, 32, of Philadelphia, was sentenced today to two years and 11 months in prison over his actions while his co-conspirator, Michael Kane, 39, was sentenced to almost four years.
CEO Helped Manipulate HYDRO Price
Court documents and trial evidence reveal that Kane and Hampton, Head of Financial Engineering, employed illicit tactics to artificially inflate the price of the HYDRO token. From October 2018 to April 2019, Kane and Hampton hired Moonwalkers Trading Limited, a South African firm, to manipulate HYDRO prices on a US-based cryptocurrency exchange.
The scheme involved using an automated trading application, or “bot,” to flood the market with fake orders. This strategy, which included approximately $7 million in “wash trades” and over $300 million in “spoof trades,” misled retail investors into buying HYDRO at inflated prices.
These fraudulent activities enabled Kane, Hampton, and their associates to generate around $2 million in profits over the course of ten months. The manipulative trades successfully created an artificial market environment, tricking investors into purchasing the token based on distorted price signals.
All Four Accused Pleaded Guilty
Kane pleaded guilty in November 2023 to multiple charges, including conspiracy to commit securities price manipulation, conspiracy to commit wire fraud, and two counts of wire fraud. Hampton faced trial and was convicted on February 7, 2024, on charges of conspiracy to commit securities price manipulation and conspiracy to commit wire fraud.
The jury unanimously determined that HYDRO sales were indeed investment contracts, thereby classifying the token as a security under federal law. This landmark ruling marked the first criminal jury trial where a cryptocurrency was adjudged a security.
In addition to Kane and Hampton, two other co-conspirators, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023 to conspiracy charges related to securities price manipulation and wire fraud. Both individuals have already been sentenced.
SEC Could Use Ruling
Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division, noted the significance of the jury’s verdict:
Shane Hampton, Michael Kane, and their co-conspirators defrauded investors 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.
These cases, and others like them, could be used by the likes of the Securities and Exchange Commission (SEC) when prosecuting exchanges and crypto projects, allowing precedent to be set in its favor.
