Former CEO of Hydrogen Technology Corporation Sentenced to 45 Months in Prison for Cryptocurrency Price Manipulation Scheme
A Florida judge has sentenced Michael Kane, the former CEO of Hydrogen Technology Corporation, to 45 months in prison for his involvement in a cryptocurrency price manipulation scheme. Kane and his co-conspirators defrauded investors in connection with the purchase of Hydrogen Technology’s crypto token, HYDRO.
The United States Justice Department announced that Kane received his sentence on June 24, following a federal court’s findings. Shane Hampton, Hydrogen Technology’s former Head of Financial Engineering, was also sentenced to 35 months for similar offenses.
Court documents and trial evidence revealed that Kane, Hampton, and an external firm, Moonwalkers Trading Limited of South Africa, manipulated HYDRO’s price on a U.S.-based cryptocurrency exchange. They used an automated trading application, or “bot,” to flood the market with fake orders from October 2018 to April 2019.
This resulted in approximately $7 million in “wash trades” and over $300 million in “spoof trades.” The fraudulent trades artificially inflated HYDRO’s price, enticing retail investors to purchase the token. Kane, Hampton, and their associates profited about $2 million over ten months through these manipulative efforts.
Kane pleaded guilty in November 2023 to charges including conspiracy to commit securities price manipulation, conspiracy to commit wire fraud, and wire fraud. Principal Deputy Assistant Attorney General Nicole Argentieri emphasized the significance of the case, stating, “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.”
Hampton, convicted by a federal jury on February 7, faced charges of conspiracy to commit securities price manipulation and conspiracy to commit wire fraud. The jury’s decision confirmed that the sales of HYDRO were investment contracts, classifying the token as a security under federal law.
In addition to the criminal charges, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kane and Hydrogen Technology in September 2022. The SEC alleged that Kane used the firm’s market maker to manipulate HYDRO’s volume and price. In April 2023, a New York judge ordered Kane and the firm to pay $2.8 million in remedies and civil penalties.
Kane had been awaiting sentencing since his guilty plea in November 2023. Hampton was convicted of similar charges in February. Two other former Hydrogen Technology executives, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023 for their involvement in the scheme.
This case is part of a broader trend in which the SEC has been accusing cryptocurrencies of being securities. Last year, the SEC filed a lawsuit against Coinbase, alleging that the exchange acted as an unregistered securities broker, exchange, and clearing agency. The SEC has accused around 60 cryptocurrencies of being securities, including Terraform Labs in February 2023.
The sentencing of Kane and Hampton serves as a warning that the Justice Department will use all tools at its disposal to protect the integrity of cryptocurrency markets and prosecute those who engage in fraudulent activities.
