Price manipulation accused of securities fraud! Two men in the US sentenced for manipulating cryptocurrency prices

According to a U.S. Department of Justice announcement, two men have been sentenced for manipulating the price of the cryptocurrency HYDRO from Hydrogen Technology and defrauding investors. This case marked the first time that cryptocurrency was recognized as a security in a federal criminal trial, with securities fraud charges related to price manipulation.

Convicted of Securities Fraud and Manipulating Cryptocurrency Prices

32-year-old Shane Hampton from Philadelphia has been sentenced to 2 years and 11 months in prison. His accomplice, 39-year-old Michael Kane from Miami Beach, Florida, received a sentence of 3 years and 9 months.

Jury First Time Recognizes Cryptocurrency as Securities

U.S. Department of Justice prosecutor Nicole M. Argentieri stated, "Shane Hampton, Michael Kane, and their co-conspirators used trading bots to manipulate the prices of their company's cryptocurrency, deceiving investors. The jury in this case has, for the first time, recognized cryptocurrency as securities and deemed the manipulation of cryptocurrency prices as securities fraud. This indictment and conviction should serve as a warning that the criminal division will use all tools, including federal securities laws, to protect the integrity of the cryptocurrency market."

Fraudulent Activity: Manipulating Prices with Bots

According to court documents and evidence presented during the trial, Kane was the co-founder and CEO of Hydrogen Technology, while Hampton was the company's financial engineering director. They hired an external South African company, Moonwalkers Trading Limited, to use automated trading applications or "bots" to manipulate the price of HYDRO on a U.S. cryptocurrency exchange.

From October 2018 to April 2019, Kane, Hampton, and their co-conspirators executed approximately $7 million in "wash trades" and placed over $300 million in "spoof orders" through bots. These manipulative trades were intended to deceive and successfully deceived retail investors into purchasing HYDRO. Through the artificially inflated prices generated by their manipulation, Kane, Hampton, and their co-conspirators made approximately $2 million in profits from selling HYDRO over about 10 months.

Guilty Pleas and Convictions

Kane pleaded guilty in November 2023 to one count of conspiracy to manipulate securities prices, one count of conspiracy to commit wire fraud, and two counts of wire fraud. Hampton was unanimously convicted by a federal jury on February 7 of conspiracy to manipulate securities prices and conspiracy to commit wire fraud. The jury unanimously found that the HYDRO tokens sold by the defendants constituted investment contracts, making the token a security under federal securities laws. This is the first case where a criminal jury trial has recognized cryptocurrency as securities.