US DOJ Sentences Former Executives for Multimillion-Dollar Crypto Fraud

UTC by Chimamanda U. Martha · 3 min read
US DOJ Sentences Former Executives for Multimillion-Dollar Crypto Fraud
Photo: Depositphotos

The United States Department of Justice (DOJ) has sentenced two men for orchestrating a multimillion-dollar cryptocurrency fraud scheme, marking a significant victory in the fight against financial crime in the digital asset market.

Shane Hampton, a 32-year-old resident of Philadelphia, and Michael Kane, a 39-year-old from Florida, have received prison sentences of 11 months and three years and nine months, respectively. Both men were top executives at Hydrogen Technology Corporation. Kane, who is also the co-founder of the company, served as its CEO until his arrest for fraud in 2022, while Hampton, a software engineer, was the head of financial engineering at the firm.

Manipulating the Market

According to a recent announcement, both men were involved in market manipulation that defrauded multimillion dollars from investors who trusted the company’s vision and invested in HYDRO, its native crypto.

Between October 2018 to April 2019, the duo enlisted the help of a South African crypto company dubbed Moonwalkers Trading Limited to manipulate the price of HYDRO on an unnamed crypto exchange registered in the United States. Kane and Hampton then used an automated trading bot to create fake orders and flood the market with fraudulent trades designed to deceive investors and artificially inflate the value of HYDRO. The two men along with their co-conspirators conducted about $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO using the bot. These deceptive trades aimed to trick retail investors into buying HYDRO by inflating its price artificially.

As a result, they earned approximately $2 million in profits from selling HYDRO over a period of about 10 months. However, their cup were filled when the US Securities and Exchange Commission (SEC) caught wind of their operations and subsequently sued the company’s former executive for fraud in 2022.

Guilty Pleas and Convictions

Following the SEC’s lawsuits in September of 2022, 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.

Before he took the guilty plea, Kane and his company were ordered to pay $2.8 million in remedies and civil penalties in April 2023 by a New York court.

His partner Hampton was convicted by a federal jury earlier this year in February of one count of conspiracy to commit wire and securities fraud in violation of the US federal law. During the trial for his conviction, the jury “unanimously found that the defendants’ sales of HYDRO constituted investment contracts,” making the token a security.

First Criminal Case

The case was the first criminal jury trial in which a cryptocurrency, in this case HYDRO, was found to be a security under American law.

“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,” said Principal Deputy Assistant Attorney General Nicole Argentieri.

He also stated that sentencing of both Kane and Hampton should serve as a warning to other bad actors in the crypto economy, adding that the law enforcement will continue to fight to protect consumers and would stop at nothing until the criminals are brought to justice.

Altcoin News, Bitcoin News, Cryptocurrency News, News
Related Articles