Former Executives Michael Kane and Shane Hampton have both been arrested by the US DOJ for their involvement in a multimillion-dollar crypto fraud.
Shane Hampton, a 32-year-old Philadelphia resident, and Michael Kane, a 39-year-old Florida resident, have been each sentenced to 11 months and three years and nine months in prison. Hydrogen Technology Corporation employed both individuals as leading executives. Kane, the company’s co-founder, served as its CEO until his arrest for fraud in 2022. Hampton, a software engineer, was the firm’s financial engineering director.
Market Manipulation
Both individuals were allegedly involved in market manipulation that resulted in the theft of millions of dollars from investors who had faith in the company’s vision and invested in HYDRO, its native cryptocurrency, according to a recent announcement.
Moonwalkers Trading Limited, a South African crypto company, was employed by the duo to manipulate the price of HYDRO on an unnamed crypto exchange incorporated in the United States from October 2018 to April 2019. Kane and Hampton subsequently employed an automated trading bot to generate fictitious orders and inundate the market with fraudulent transactions intended to deceive investors and artificially inflate the value of HYDRO. The two men and their co-conspirators employed the automaton to execute approximately $7 million in “wash trades” and more than $300 million in “spoof trades” for HYDRO. These deceptive transactions deceived retail investors into purchasing HYDRO by artificially inflating its price.
Consequently, they generated approximately $2 million in proceeds from the sale of HYDRO over approximately ten months. In 2022, the US Securities and Exchange Commission (SEC) sued the company’s former executive for fraud after becoming aware of its operations. Nevertheless, their cup was already full.
Convictions and Pleas of Guilt
Kane pleaded guilty to one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud in November 2023, following the SEC’s litigation in September 2022.
In April 2023, a New York court ordered Kane and his company to pay $2.8 million in remedies and civil penalties before his guilty plea.
In February of this year, a federal jury found his companion Hampton guilty of one count of conspiracy to commit wire and securities fraud in violation of US federal law. The jury “unanimously found that the defendant’s sales of HYDRO constituted investment contracts” during the trial for his conviction, thereby classifying the token as a security.
The initial criminal case
The case was the first criminal jury trial in which a cryptocurrency, HYDRO, in this instance, was determined to be a security under American law.
“Principal Deputy Assistant Attorney General Nicole Argentieri stated that the jury in this federal criminal trial for the first time determined that a cryptocurrency was a security and that manipulating cryptocurrency prices was Securities Fraud.”
He also stated that the sentencing of Kane and Hampton should serve as a warning to other bad actors in the crypto economy and that law enforcement will continue to fight to protect consumers and stop at nothing until the perpetrators are brought to justice.