American Duo Gets Prison Time for Manipulating Crypto Price

Michael Kane and Shane Hampton have received jail terms for manipulating the price of a cryptocurrency of their company, Hydrogen Technologies, with wash and spoof trading, thus defrauding investors.

Jail For Market Manipulation

According to the announcement by the Department of Justice yesterday (Tuesday), Kane, co-founder and CEO of the company, received three years and nine months in prison, while Hampton, the Head of Financial Engineering, received two years and 11 months.

The sentencing came after Kane pled 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 last November. Hampton, on the other hand, was convicted in February for one count of conspiracy to commit securities price manipulation and one count of conspiracy to commit wire fraud.

“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 the Principal Deputy Assistant Attorney General, Nicole Argentieri.

Wash and Spoof Trades

The duo hired South Africa-based Moonwalkers Trading to manipulate the price of HYDRO, the token of Hydrogen Technologies, on a US-headquartered cryptocurrency exchange. Between October 2018 and April 2019, the cryptocurrency exchange flooded the market with fake and fraudulent orders using an automated trading application or ‘bot’.

The court documents showed that the bot executed about $7 million in “wash trades” and placed $300 million in “spoof trades.” These trades pumped the price of HYDRO, inducing retail traders to purchase the token.

Furthermore, Kane, Hampton, and their co-conspirators made about $2 million from selling HYDRO over a 10-month period.

Meanwhile, the jury in the case found that HYDRO qualifies as an investment contract, making it an unregistered security.

“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,” Argentieri added. “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.”