In a landmark federal case, two men were sentenced for manipulating the price of a cryptocurrency and defrauding investors, marking the first instance where “a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulating cryptocurrency prices was securities fraud,” said the head of the Justice Department’s Criminal Division.
Landmark Federal Case: Jury Declares Crypto Price Manipulation as Securities Fraud
This article was published more than a year ago. Some information may no longer be current.
WRITTEN BY
SHARE
HYDRO Price Manipulation Leads to Landmark Securities Fraud Conviction
The U.S. Department of Justice (DOJ)’s Office of Public Affairs announced on Tuesday that “two men were sentenced for manipulating the price of a security and scheming to defraud investors in connection with the purchase of Hydrogen Technology’s cryptocurrency, HYDRO.” Shane Hampton, 32, of Philadelphia, received a sentence of two years and 11 months in prison. His co-conspirator, Michael Kane, 39, of Miami Beach, Florida, was sentenced to three years and nine months in prison.
Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division explained: “Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot to manipulate the price of their company’s cryptocurrency.” She added:
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.
“The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law. Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security,” the DOJ said.
According to court documents and trial evidence, Kane, the co-founder and CEO of Hydrogen Technology, and Hampton, the Head of Financial Engineering, hired Moonwalkers Trading Limited of South Africa to manipulate HYDRO’s price on a U.S.-based cryptocurrency exchange. From October 2018 to April 2019, they used an automated trading bot to flood the market with fake and fraudulent orders. This included executing approximately $7 million in wash trades and placing over $300 million in spoof trades, which artificially inflated HYDRO’s price and induced retail investors to purchase the cryptocurrency. Their manipulation efforts generated approximately $2 million in profits from HYDRO sales over about 10 months.
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. Hampton was convicted by a federal jury on February 7 of one count of conspiracy to commit securities price manipulation and one count of conspiracy to commit wire fraud.
What do you think about this case? Let us know in the comments section below.
