Two men were sentenced for manipulating the price of a security and scheming to defraud investors in connection with the purchase of Hydrogen Technology’s cryptocurrency, HYDRO.
Shane Hampton, 32, of Philadelphia, was sentenced today to two years and 11 months in prison. His co-conspirator, Michael Kane, 39, of Miami Beach, Florida, was sentenced yesterday to three years and nine months in prison.
“Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot 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. “In this case, for the first time, a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulating cryptocurrency prices was securities fraud. 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.”
According to court documents and evidence presented at trial, Kane was the co-founder and CEO of Hydrogen Technology, and Hampton was the Head of Financial Engineering at the company. Kane and Hampton hired an outside firm, Moonwalkers Trading Limited of South Africa, to manipulate the price of HYDRO on a cryptocurrency exchange headquartered in the United States by using an automated trading application or “bot” to flood the market with fake and fraudulent orders from October 2018 to April 2019. Kane, Hampton, and their co-conspirators executed approximately $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO through the bot. These manipulative trades were designed to, and did, fraudulently induce retail investors to purchase HYDRO. Through the artificially inflated prices that resulted from their manipulation efforts, Kane, Hampton, and their co-conspirators made approximately $2 million in profits from selling HYDRO over roughly 10 months.
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. Hampton was convicted by a federal jury on Feb. 7 of one count of conspiracy to commit securities price manipulation and one count of conspiracy to commit wire fraud. The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law. Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security.
Two other co-conspirators, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023 to one count of conspiracy to commit securities price manipulation and wire fraud; both were previously sentenced.
The FBI Miami Field Office investigated the case.
Assistant Chief Scott Armstrong and Trial Attorney Andrew Jaco of the Criminal Division’s Fraud Section prosecuted the case.