Photo credit: US Department of Justice

Two executives of Hydrogen Technology Corporation, Michael Kane and Shane Hampton, have been sentenced to prison for their involvement in a multimillion-dollar cryptocurrency price manipulation scheme.

Kane, the company’s chief executive, received a sentence of three years and nine months, while Hampton, the head of financial engineering, was sentenced to two years and 11 months.

The United States Department of Justice (DOJ) announced the sentences on June 25, following Kane’s guilty plea in November 2023 and Hampton’s conviction by a federal jury in February.

According to the DOJ, the executives orchestrated a scheme to artificially inflate the price of Hydrogen Technology’s cryptocurrency token, HYDRO, through wash trading and spoof orders on a US-based crypto exchange. The manipulation resulted in approximately $2 million in profits for Kane, Hampton, and their co-conspirators.

The case marks the first time a jury in a federal criminal trial has found that a crypto asset is a security and that manipulating its price constitutes securities fraud, setting a significant precedent for future crypto-related cases.

“This prosecution and the sentences imposed today should serve as a warning:  The Criminal Division will not hesitate to use all tools at its disposal — including the federal securities laws — to protect the integrity of cryptocurrency markets,” said Principal Deputy Assistant Attorney General Nicole Argentieri, head of the DOJ’s Criminal Division.

Two other individuals associated with the case, Andrew Chorlian and Tyler Ostern, admitted guilt for their roles in manipulating prices and committing wire fraud. They pleaded guilty in May 2023 and have since been sentenced.

Last year, the US District Court for the Southern District of New York imposed fines on Hydrogen Technology and Kane for breaking securities laws, which stemmed from a lawsuit filed by the Securities and Exchange Commission (SEC). Hydrogen Technology faced a fine of nearly $2.8 million, while Kane was fined $260,206.

The recent criminal case marks another effort by US authorities to regulate crypto assets deemed securities by the SEC. Although the commission is still pursuing civil actions against firms like Coinbase, Ripple, Kraken, and Binance, it has dropped efforts to label Ether as a security.

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