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Federal Jury Makes History By Ruling Crypto Manipulation As ‘Securities Fraud’

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By Aggregated - see source on June 26, 2024 Scams
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In a landmark case brought by the US Department of Justice (DOJ), two individuals have been convicted of manipulating the price of a crypto asset deemed a “security” and allegedly conspiring to defraud investors by purchasing Hydrogen Technology’s HYDRO cryptocurrency. 

The federal jury’s verdict resulted in significant prison terms for the defendants and established a crucial legal milestone. For the first time in a federal criminal trial, the jury confirmed that a cryptocurrency qualifies as a security and that manipulating its price constitutes securities fraud.

Manipulation Scheme Allegations

According to court documents and trial evidence, Kane, the co-founder and CEO of Hydrogen Technology, and Hampton, the Head of Financial Engineering at the company, engaged the services of Moonwalkers Trading Limited, based in South Africa. 

The outside firm was tasked with manipulating the price of HYDRO on an undisclosed US-based digital asset exchange using a trading bot. From October 2018 to April 2019, the defendants and their co-conspirators allegedly executed approximately $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO.

These “manipulative tactics,” including flooding the market with fake and fraudulent orders, were designed to deceive retail investors into purchasing HYDRO at “artificially inflated prices,” according to the DOJ. 

The indictment unsealed Tuesday also alleges that the defendants and their co-conspirators made approximately $2 million from the sale of HYDRO over ten months.

Shane Hampton received a sentence of two years and 11 months in prison, while his co-conspirator, Michael Kane Florida, was sentenced to three years and nine months in prison. 

Turning Point In The Crypto Market?

Principal Deputy Assistant Attorney General Nicole M. Argentieri, who heads the Justice Department’s Criminal Division, emphasized the significance of this case. She stated: 

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.

The guilty plea of co-conspirators Andrew Chorlian and Tyler Ostern, who admitted to conspiracy charges in May 2023, further solidifies the case against the defendants. Chorlian and Ostern were previously sentenced for their involvement in the conspiracy to commit securities price manipulation and wire fraud.

Ultimately, this landmark verdict and the jury’s recognition of cryptocurrency as a security mark a significant turning point in the legal landscape surrounding digital assets. 

The verdict sends a clear message that manipulation of cryptocurrency prices will be met with severe consequences. As the cryptocurrency market continues to evolve, this case serves as a reminder of the importance of new and clear rules to regulate the market, which is key to its innovation and growth.

Crypto
The daily chart shows the total crypto market cap’s valuation at $2.2 trillion. Source: TOTAL on TradingView.com

Featured image from DALL-E, chart from TradingView.com 

Credit: Source link

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