Key Points
- Shane Hampton and Michael Kane, former executives at Hydrogen Technology Corporation, have been sentenced to prison for crypto fraud.
- They manipulated the market and fraudulently inflated the value of HYDRO, the company’s native crypto, earning about $2 million in profits.
Shane Hampton, a resident of Philadelphia, and Florida-based Michael Kane, both former high-ranking officials at Hydrogen Technology Corporation, have been handed prison sentences for their involvement in a multimillion-dollar crypto fraud scheme.
Hampton, 32, served as the head of financial engineering, while Kane, 39 and co-founder of the company, held the position of CEO until his arrest in 2022.
Market Manipulation Scheme
An announcement revealed that both Hampton and Kane were implicated in a market manipulation scheme that swindled investors out of millions of dollars. These investors had put their faith in the company’s vision and invested in HYDRO, the company’s native crypto.
From October 2018 to April 2019, the pair collaborated with South African crypto company Moonwalkers Trading Limited to manipulate the price of HYDRO on an unnamed US-registered crypto exchange. Using an automated trading bot, they flooded the market with fake orders and fraudulent trades to deceive investors and artificially inflate the value of HYDRO.
The duo and their co-conspirators carried out about $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO using the bot. These deceptive trades were designed to trick retail investors into buying HYDRO by artificially inflating its price.
They managed to make approximately $2 million in profits from selling HYDRO over a period of about 10 months. However, their fraudulent activities were eventually detected by the US Securities and Exchange Commission (SEC), which sued the former executives for fraud in 2022.
Legal Proceedings and Verdict
Following the SEC’s lawsuits in September of 2022, Kane pleaded guilty in November 2023 to one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud.
Before he pleaded guilty, Kane and his company were ordered by a New York court in April 2023 to pay $2.8 million in remedies and civil penalties.
Hampton, on the other hand, was convicted by a federal jury in February of the same year for one count of conspiracy to commit wire and securities fraud in violation of the US federal law. During his trial, the jury unanimously agreed that the sales of HYDRO constituted investment contracts, thereby classifying the token as a security.
Historic Crypto Case
This case marked the first criminal jury trial where a cryptocurrency, in this case HYDRO, was classified as a security under American law.
Principal Deputy Assistant Attorney General Nicole Argentieri stated that this was the first instance in which a federal criminal trial jury found a cryptocurrency to be a security and that manipulating cryptocurrency prices was securities fraud.
She also emphasized that the sentencing of both Kane and Hampton should serve as a deterrent to other potential wrongdoers in the crypto economy. She further added that law enforcement will persist in its efforts to protect consumers and will not rest until all culprits are brought to justice.
