In a landmark case brought by the U.S. Department of Justice (DOJ), two individuals were found guilty of manipulating the price of a crypto asset considered a “security” and allegedly conspiring to defraud investors in purchasing the HYDRO cryptocurrency from Hydrogen Technology.
The Federal Jury’s Verdict successful significant prison sentences for the accused and took a crucial legal step. For the first time in a federal criminal trial, the jury confirmed that a cryptocurrency qualifies as a security and that manipulating its price constitutes securities fraud.
Allegations of manipulation scheme
According to court documents and trial evidence, Kane, co-founder and CEO of Hydrogen Technology, and Hampton, the company’s head of financial engineering, retained South Africa-based Moonwalkers Trading Limited .
The outside company was responsible for manipulating HYDRO’s price in an undisclosed U.S. market. digital asset exchange using a trading robot. From October 2018 to April 2019, the defendants and their co-conspirators allegedly executed approximately $7 million in “fictitious trades” and placed more than $300 million in “fraudulent trades” for HYDRO.
These “manipulatory tactics,” including flooding the market with false and fraudulent orders, were designed to deceive retail investors into purchasing HYDRO at “artificially inflated prices,” according to the DOJ.
The indictment unsealed Tuesday also alleges that the defendants and their co-conspirators made approximately $2 million from the deal. sale of HYDRO over ten months.
Shane Hampton was sentenced to two years and 11 months in prison, while his co-conspirator, Michael Kane Florida, was sentenced to three years and nine months in prison.
A turning point in the crypto market?
Principal Assistant Attorney General Nicole M. Argentieri, who heads the Justice Department’s criminal division, noted the importance of this case. She said:
In this case, for the first time, a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulation of cryptocurrency prices constituted securities fraud. This prosecution and the sentences imposed today should serve as a warning that the Criminal Division will not hesitate to use every tool at its disposal, including the federal securities laws, to protect the integrity of cryptocurrency markets .
The guilty pleas of co-conspirators Andrew Chorlian and Tyler Ostern, who admitted to conspiracy charges In May 2023, the charges against the accused are further strengthened. Chorlian and Ostern were previously convicted for their involvement in a conspiracy to manipulate securities prices and commit wire fraud.
Ultimately, this historic verdict and the jury’s recognition of cryptocurrency as a security mark an important turning point in the legal landscape surrounding digital assets.
The verdict sends a clear message that manipulating cryptocurrency prices will lead to serious consequences. As the cryptocurrency market continues to evolve, this case serves as a reminder of the importance of new and clear rules to regulate the market, which are essential for its innovation and growth.
Featured image of DALL-E, chart by TradingView.com
