A federal judge in Florida has sentenced Michael Kane, the former CEO of Hydrogen Technology Corporation, to 3.75 years in prison following his guilty plea.
Sentencing and Charges
On June 24, a federal judge sentenced Kane to 45 months for securities fraud related to a cryptocurrency price manipulation scheme. Shane Hampton, the former Head of Financial Engineering at Hydrogen Technology, received a 35-month sentence for similar offenses.
Historic Verdict
“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. This marks the first time a federal jury has recognized a cryptocurrency as a security and deemed price manipulation of it as securities fraud.
SEC Lawsuit and Penalties
The U.S. Securities and Exchange Commission (SEC) sued Kane and Hydrogen Technology in September 2022, alleging that Kane manipulated the volume and price of the company’s Hydro (HYDRO) token using the firm’s market maker. In April 2023, a New York judge ordered Kane and the firm to pay $2.8 million in remedies and civil penalties. Around the same time, criminal indictments for Kane and Hampton were announced in the Southern District of Florida.
Also Read: 1,590 CoinStats Crypto Wallets Compromised in Security Breach
Additional Convictions
Kane pleaded guilty to one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. He had been awaiting sentencing since November 2023. Hampton was convicted of similar charges in February. Additionally, two other former Hydrogen Technology executives, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023.
Broader Implications for Crypto Regulation
This case is part of a broader effort by U.S. officials to regulate cryptocurrencies classified as securities. While the SEC has civil cases pending against crypto firms like Coinbase, Ripple, Kraken, and Binance, it has reportedly ceased efforts to classify Ether as a security. On June 19, security firm Consensys reported that the SEC would not pursue enforcement action over Ether. This followed Consensys’ lawsuit against the SEC in April after receiving a Wells notice from the regulator.
