Crypto Price Manipulation and Securities Fraud Lead to Two Prison Sentences

Two men have been sentenced for manipulating the price of Hydrogen Technology’s cryptocurrency, HYDRO, and plotting to defraud investors.

This case marks the first time a jury in a federal criminal trial has classified a cryptocurrency as a security and found that cryptocurrency price manipulation constitutes securities fraud.

$300 Million HYDRO Crypto Ponzi Scheme

Court documents and trial evidence open Kane, co-founder and CEO of Hydrogen Technology, and Hampton, the company’s head of financial engineering, hired Monowalkers Trading Ltd. of South Africa to manipulate Hydro’s price. From October 2018 to April 2019, the company used an automated trading bot to create false and fraudulent orders on a US-based cryptocurrency exchange.

Kane, Hampton, and their co-conspirators conducted approximately $7 million in “wash deals” and placed more than $300 million in “spoof deals” for HYDRO. These trades misled retail investors into purchasing HYDRO at artificially inflated prices, resulting in conspirators in profits of approximately $2 million over a ten-month period.

“Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading robot to manipulate the price of their company’s cryptocurrency,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division.

Price manipulation and securities fraud

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. A federal jury convicted Hampton on February 7 of one count of conspiracy to commit securities price manipulation and one count of conspiracy to commit wire fraud.

The jury unanimously decided that the defendants’ sales of HYDRO were investment contracts, and therefore the token was classified as a security under federal securities law. This trial was the first criminal jury trial in which cryptocurrency was deemed a security.

Two other co-conspirators, Andrew Kurlian and Tyler Ostern, pleaded guilty in May 2023 to one count each of conspiracy to commit securities price manipulation and wire fraud. Each had previously been sentenced.

Shane Hampton, 32, of Philadelphia, was sentenced to two years and 11 months in prison. His co-conspirator, Michael Caine, 39, of Miami Beach, Florida, was sentenced to three years and nine months in prison.