Two individuals have received sentences for their involvement in a significant case involving the manipulation of a cryptocurrency's price and defrauding investors.
The charges are related to the acquisition of HYDRO, the cryptocurrency of Hydrogen Technology.
Shane Hampton, a 32-year-old resident of Philadelphia, has been handed a sentence of two years and 11 months. Meanwhile,
Michael Kane, a 39-year-old individual from Miami Beach, Florida, has been sentenced to three years and nine months behind bars.
The gravity of this case was made clear by Principal Deputy Assistant Attorney General Nicole M. Argentieri, who leads the Justice Department's Criminal Division.
She highlighted that Shane Hampton, Michael Kane, and their co-conspirators deceived investors by employing a trading bot to manipulate their company's cryptocurrency's price.
In a groundbreaking verdict, a federal jury has ruled that a particular cryptocurrency is indeed a security.
This decision also establishes that the act of manipulating cryptocurrency prices constitutes securities fraud.
The prosecution and the sentences handed down today should be a clear warning. The Criminal Division is determined to utilize every available resource, including the federal securities laws, to safeguard the integrity of cryptocurrency markets.
Kane, the co-founder and CEO of Hydrogen Technology, along with Hampton, who serves as the Head of Financial Engineering, have been accused of orchestrating a scheme with Moonwalkers Trading Limited, a South African firm.
The alleged plan involved manipulating the price of HYDRO through the use of an automated trading bot. Between October 2018 and April 2019, an estimated $7 million was executed in “wash trades” and over $300 million was placed in “spoof trades” on a cryptocurrency exchange based in the United States.
The trades in question gave a misleading picture of market activity, deceiving retail investors into buying HYDRO at prices that were artificially inflated.
Kane, Hampton, and their co-conspirators managed to make a staggering $2 million in just ten months.
In November 2023, Kane entered a guilty plea for charges including conspiracy to commit securities price manipulation, conspiracy to commit wire fraud, and wire fraud.
On February 7, a federal jury found Hampton guilty of conspiracy to commit securities price manipulation and conspiracy to commit wire fraud.
In the criminal trial, the jury reached a unanimous verdict, establishing a legal precedent by determining a cryptocurrency as a security.
In May 2023, Andrew Chorlian and Tyler Ostern pleaded guilty to one count of conspiracy to commit securities price manipulation and wire fraud. Both individuals received their sentences earlier.
The FBI Miami Field Office conducted the investigation into the case, with Assistant Chief Scott Armstrong and Trial Attorney Andrew Jaco from the Criminal Division's Fraud Section leading the prosecution.