Crypto executives risk decades in prison for $2 million manipulation of HYDRO
If convicted, they each face a maximum penalty of five years in prison on the conspiracy to commit securities price manipulation count and 20 years in prison on each of the other charged counts.
Two U.S. citizens and a South African national were charged with conspiring to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation.
According to court documents, Michael Kane, Shane Hampton, and George Wolvaardt allegedly conspired to manipulate the market for HYDRO, a token on the Ethereum blockchain platform, and defraud market participants by creating the false appearance of supply and demand for HYDRO to induce other market participants to trade at prices, quantities, and times that they otherwise would not have traded.
Hydrogen Technology and market-maker Moonwalkers inflated HYDRO price
Michael Kane was the co-founder and CEO of Hydrogen Technology and Shane Hampton was the Chief of Financial Engineering for the company. George Wolvaardt was the Chief Technology Officer for Moonwalkers Trading Limited, a self-described “market-making” firm that purportedly designed the trading bot and was hired by Kane and Hampton to manipulate the market for HYDRO.
The defendants allegedly used a trading bot to place thousands of orders that they did not intend to execute, or “spoof orders,” and thousands of orders where the bot bought and sold tokens to itself through the same account, or “wash trades.” The co-conspirators allegedly reaped $2 million in profit through their sales of HYDRO at artificially inflated prices.
Michael Kane, Shane Hampton, and George Wolvaardt are each charged with one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. If convicted, they each face a maximum penalty of five years in prison on the conspiracy to commit securities price manipulation count and 20 years in prison on each of the other charged counts.
Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer at Hydrogen Technology, were also charged for their participation in the scheme. Ostern and Chorlian are each charged with one count of conspiracy to commit securities price manipulation and wire fraud. If convicted, they each face a maximum penalty of five years in prison.
SEC won civil case against Hydrogen and Michael Kane last week
The criminal charges in Miami, Florida, follow the end of the civil case brought forth by the Securities Exchange Commission, which filed a complaint in September 2022 against the Hydrogen Technology Corporation, CEO Michael Ross Kane, and Moonwalkers CEO Tyler Ostern for the alleged price manipulation of the firm’s proprietary token, HYDRO.
Tyler Ostern, the CEO of Moonwalkers Ltd., was also charged in the lawsuit but quickly settled charges by agreeing to pay $41,000. On April 20th, the courts reached a final decision regarding the fate of Hydrogen Corp. and its CEO.
The court prohibited Kane from participating in further offerings of crypto assets, effectively barring him from business deals that involve cryptocurrencies forever. However, he is still permitted to buy, sell and invest in cryptocurrencies from his personal account(s). The defendant was also ordered to burn – or remove from the market by other means – all HYDRO tokens in his personal accounts and the accounts his company controls.
Hydrogen Technology and Michael Kane also have up to a year to pay over $2.6 million in fines and disgorgement fees, the latter being the legal term for restitution of unlawfully made profits. The firm currently owes the SEC more than $1.5 million in disgorgement, prejudgement interest worth over $244k, and a civil penalty of over $1 million. Michael Ross Kane has also been ordered to pay a separate civil penalty of over $260k for his coordinating role in the scheme.
