As a crypto investor with several years of experience in the market, I find this case both alarming and enlightening. It’s alarming because it highlights the existence of fraudulent schemes that manipulate prices and defraud unsuspecting investors like myself. But it’s also enlightening because it sets a precedent for the classification of cryptocurrencies as securities and the prosecution of price manipulation as securities fraud.
As a financial analyst, I’ve come across the following situation: Two individuals have received judgments in court for their involvement in manipulating Hydrogen Technology’s cryptocurrency, HYDRO, and devising a plan to deceive investors.
As a crypto investor, I’ve come across an important legal development: For the first time, a federal jury has determined that a specific cryptocurrency qualifies as a security under securities laws. Moreover, the jury found that manipulating the price of this cryptocurrency amounts to securities fraud. This ruling sets a significant precedent for future cases involving crypto securities and price manipulation allegations.
$300M HYDRO Crypto Fraud Scheme
According to court records and trial evidence, Kane, the co-founder and CEO of Hydrogen Technology, and Hampton, the company’s Head of Financial Engineering, hired Moonwalkers Trading Limited based in South Africa to influence the price of HYDRO. From October 2018 through April 2019, this firm employed an automated trading bot to generate deceptive buy and sell orders on a US cryptocurrency exchange.
Kane, Hampton, and their associates executed around $7 million worth of “wash trades” and over $300 million in “spoof trades” for HYDRO between them. These manipulative trading activities falsely inflated the market price of HYDPO, leading unsuspecting retail investors to buy at artificially high prices. The conspirators then reaped a profit of roughly $2 million over a ten-month period.
“Nicole M. Argentieri, the principal deputy chief of the Justice Department’s Criminal Division, stated that Shane Hampton, Michael Kane, and their accomplices deceitfully swindled investors by employing a trading bot to artificially inflate the value of their company’s cryptocurrency.”
Price Manipulation and Securities Fraud
In November 2023, Kane admitted his guilt in a U.S. court for one charge each of conspiring to manipulate securities prices and conspiring to commit wire fraud, as well as two counts of wire fraud. On February 7, Hampton was found guilty by a jury for his involvement in one charge each of conspiring to manipulate securities prices and conspiring to commit wire fraud.
In this landmark case, the jury reached a consensus that the defendants’ transactions involving HYDRO tokens qualified as investment contracts, consequently labeling the digital asset as a security under federal securities legislation. This groundbreaking trial marked the first criminal jury proceeding where a cryptocurrency was identified as a security.
As an analyst, I’d rephrase it as: In May 2023, Andrew Chorlian and Tyler Ostern admitted their guilt in a conspiracy to manipulate securities prices and commit wire fraud, for which they each faced one count. Both individuals have previously served sentences for their crimes.
Shane Hampton, a 32-year-old resident of Philadelphia, was given a prison term of two years and eleven months. In comparison, Michael Kane, aged 39 from Miami Beach, Florida, received a sentence of three years and nine months in prison.
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2024-06-30 18:06