2 Million Profit in Exchange for Decades in Prison

Three people—two Americans and one South African—were accused of planning to manipulate the price of HYDRO, a virtual asset produced by the Hydrogen Technology Corporation.

Hydro (HYDRO) is an ERC-20 token that runs on the Ethereum blockchain platform. It is used as a means of payment and governance within the Hydro ecosystem.

The Hydro protocol provides several financial services, including decentralised identity management, authentication, and access control. These services enable developers to build decentralised applications that are secure, transparent, and accessible to anyone.

Hydro token holders can use their tokens to access these services and participate in the governance of the Hydro ecosystem. They can also earn rewards for staking their tokens or participating in community initiatives.

According to court documents, Michael Kane, Shane Hampton, and George Wolvaardt allegedly planned to defraud market participants by fabricating the appearance of supply and demand for HYDRO to persuade other market participants to trade at prices, quantities, and times that they otherwise would not have traded.

Shane Hampton was Hydrogen Technology's Chief of Financial Engineering, and Michael Kane was the company's co-founder and CEO. George Wolvaardt was the company's, Chief Technology Officer. Kane and Hampton employed Moonwalkers Trading Limited, a self-described “market-making” company, to create the trading bot and manipulate the market for HYDRO.

The defendants are accused of using a trading bot to place thousands of orders that they had no intention of carrying out, or “spoof orders,” as well as thousands of orders where the bot made purchases and sales of tokens to itself using the same account, or “wash trades.” By selling HYDRO at inflated prices, the conspirators allegedly made $2 million in profit.

One count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two charges of wire fraud are each brought against Michael Kane, Shane Hampton, and George Wolvaardt. If found guilty, each defendant could receive a maximum sentence of five years in jail for conspiring to manipulate the price of securities and twenty years for each additional offence.

Additionally penalised for their involvement in the plan were Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer at Hydrogen Technology. Ostern and Chorlian are accused of conspiring to commit securities price manipulation and wire fraud on one count. They each might get a maximum sentence of five years in prison if found guilty.

The Securities Exchange Commission filed a complaint in September 2022 against the Hydrogen Technology Corporation, CEO Michael Ross Kane, and Moonwalkers CEO Tyler Ostern for the alleged price manipulation of the company's proprietary token, HYDRO. Following the conclusion of the civil case, the Securities Exchange Commission filed criminal charges in Miami, Florida.

Although Tyler Ostern, the CEO of Moonwalkers Ltd., was also accused in the case, he promptly agreed to pay $41,000 to resolve the matter. The courts finally decided the destiny of Hydrogen Corp. and its CEO on April 20th.

Kane was permanently barred from business transactions using cryptocurrencies by the court's order forbidding him from participating in any future digital asset offerings. He may, however, continue to use his personal account(s) to purchase, trade, and invest in cryptocurrencies. Additionally, the defendant was mandated to destroy or otherwise withdraw from the market all HYDRO tokens held in his individual accounts and those that belong to his business.

In addition, Michael Kane and Hydrogen Technology have one year to pay over $2.6 million in fines and disgorgement fees—the latter of which is the legal phrase for restoring gains that were made illegally. The company currently owes the SEC over $1.5 million in disgorgement, over $244k in prejudgment interest, and over $1 million in civil penalties. For his coordination role in the fraud, Michael Ross Kane was also mandated to pay a separate civil penalty of nearly $260,000.