Crypto News – Federal Jury Recognizes Cryptocurrency as a Security in Landmark Fraud Case
Crypto News – In a landmark decision this week, two executives from Hydrogen Technology were sentenced for orchestrating a sophisticated cryptocurrency securities fraud, marking the first time a cryptocurrency has been officially classified as a security by a federal jury. This pivotal ruling could establish a legal precedent that clarifies how securities laws are applied to digital assets, offering a more defined regulatory framework for entrepreneurs and investors.
Sentencing Details
Shane Hampton, aged 32 from Philadelphia, received a sentence of two years and 11 months. Meanwhile, his accomplice, 39-year-old Michael Kane from Miami Beach, was handed a prison term of three years and nine months. The sentencing was handed down following their conviction of market manipulation associated with their company’s digital token, HYDRO.
The Scheme
According to the US Department of Justice, from October 2018 to April 2019, Kane, who served as the CEO, and Hampton, the Head of Financial Engineering, engaged in deceptive market practices. They orchestrated about $7 million in “wash trades” and over $300 million in “spoof trades” to artificially inflate the price of HYDRO through the use of trading bots that executed fake orders on prominent US cryptocurrency exchanges.
These manipulative tactics not only skewed the market price but also misled investors, convincing them to purchase the HYDRO token under false pretenses. The duo’s fraudulent activities netted them approximately $2 million in illicit profits over a span of just 10 months.
Broader Implications and Ongoing Crackdowns
Nicole M. Argentieri, Principal Deputy Assistant Attorney General, stressed the significance of this case. “For the first time, a jury in a federal criminal trial has determined that a cryptocurrency can be classified as a security, and that manipulating its price constitutes securities fraud,” she stated. Argentieri underscored the message that the sentencing sends to the crypto industry: U.S. authorities will relentlessly utilize federal securities laws to protect market integrity and investor interests.
This case is part of a continuing effort by U.S. authorities to address illegal activities in the cryptocurrency sector. Earlier this year, Irina Dilkinska, the former legal chief at OneCoin, was sentenced to four years in prison for her role in a vast pyramid scheme. Additionally, Changpeng Zhao, the former CEO of Binance, commenced a four-month sentence on June 1 at the Federal Correctional Institution in Lompoc, California, for failing to establish an adequate anti-money laundering program.
These actions reflect a growing movement by U.S. law enforcement to enhance scrutiny and regulation of the cryptocurrency industry, ensuring the protection of investors and the maintenance of market integrity.
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