Two executives from financial technology company Hydrogen Technology have been jailed for their role in blowing up the company’s cryptocurrency, HYDRO.
In a statement, the U.S. Department of Justice (DOJ) said Hydrogen Technology co-founder and CEO Michael Kane of Miami Beach, Florida and Financial Engineering Chief Shane Hampton of Philadelphia, Pennsylvania were convicted of orchestrating cryptocurrency securities fraud and wire fraud. .
The two men are accused of hiring South African software-enabled market making company Moonwalkers Trading Limited to inflate the price of HYDRO on a US-based crypto exchange using a trading bot that traded the market between October 2018 and April 2019 flooded with false and fraudulent orders.
The duo and their co-conspirators then executed approximately $7 million in wash trades and $300 million in spoof trades through the bot, ultimately profiting approximately $2 million from HYDRO sales.
The DOJ says the case is the first criminal jury trial to find that cryptocurrency is a security asset and that manipulating cryptocurrency prices is a securities fraud.
“The jury unanimously found that defendants’ sales of HYDRO constituted investment contracts, making the token a security under the federal securities laws. Hampton’s case was the first jury trial to find that a cryptocurrency was a security asset.”
Kane was sentenced to three years and nine months in prison, while Hampton will spend two years and eleven months behind bars.
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