The former CEO of Hydrogen Technology Corporation, Michael Kane, has been sentenced to nearly four years in prison after pleading guilty, a Florida judge has declared. A federal judge sentenced Kane to 45 months in prison, while Shane Hampton, the company’s former Head of Financial Engineering, received a 35-month sentence for similar crimes, according to the United States Justice Department.
This case marks the first time in a federal criminal trial that a cryptocurrency was found to be a security and manipulating cryptocurrency prices was considered securities fraud. Principal Deputy Assistant Attorney General Nicole Argentieri stated that the prosecution and the sentences imposed serve as a warning that the Criminal Division will use all tools at its disposal to protect the integrity of cryptocurrency markets, including the federal securities laws.
The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kane and Hydrogen Technology in September 2022, alleging the former CEO used the firm’s market maker to perpetrate a scheme manipulating the volume and price of the company’s Hydro (HYDRO) token. In April 2023, a New York judge ordered Kane and the firm to pay $2.8 million in remedies and civil penalties, and announced Kane’s and Hampton’s criminal indictments in the Southern District of Florida.
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 by a jury in February. Two other former Hydrogen Technology executives involved in the scheme, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023.
The criminal case is part of a broader effort by U.S. officials to target cryptocurrencies that the SEC considers securities under its purview. Though the commission has civil cases pending against crypto firms, including Coinbase, Ripple, Kraken, and Binance, it has reportedly abandoned attempts to classify Ether (ETH) as a security.
Security firm Consensys reported on June 19 that the SEC did not intend to pursue an enforcement action over Ether. The company filed a lawsuit against the SEC in April after receiving a Wells notice from the regulator.