Sentencing in Multimillion-Dollar Cryptocurrency Securities Fraud and Wire Fraud Schemes
Author: Destiny Aigbe
July 1, 2024
The cryptocurrency market faces ongoing scrutiny and regulation as exemplified by a recent landmark case. Shane Hampton and Michael Kane have been sentenced for their roles in manipulating the price of Hydrogen Technology’s cryptocurrency, HYDRO, resulting in multimillion-dollar securities fraud and wire fraud schemes.
DETAILS OF THE CASE
Shane Hampton, 32, of Philadelphia, was sentenced to two years and 11 months in prison, while Michael Kane, 39, of Miami Beach, Florida, received a sentence of three years and nine months. These sentences follow their orchestration of a sophisticated scheme to defraud investors through price manipulation.
Key Points:
- Principal Deputy Assistant Attorney General Nicole M. Argentieri emphasized the significance of 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."
- Roles: Kane was the co-founder and CEO of Hydrogen Technology, and Hampton served as the Head of Financial Engineering.
THE FRAUDULENT SCHEME
From October 2018 to April 2019, Kane and Hampton employed Moonwalkers Trading Limited, a South African firm, to manipulate HYDRO’s price on a U.S.-based cryptocurrency exchange. They used an automated trading bot to execute approximately $7 million in “wash trades” and placed over $300 million in “spoof trades,” creating an illusion of market activity and fraudulently inflating the token’s price.
LEGAL OUTCOMES
- Michael Kane pleaded guilty in November 2023 to:
- One count of conspiracy to commit securities price manipulation.
- One count of conspiracy to commit wire fraud.
- Two counts of wire fraud.
- Shane Hampton was convicted by a federal jury on February 7, 2024, of:
- One count of conspiracy to commit securities price manipulation.
- One count of conspiracy to commit wire fraud.
The jury's unanimous decision confirmed that the sales of HYDRO were investment contracts, thereby categorizing the token as a security under federal securities law. This marked the first criminal jury trial where a cryptocurrency was deemed a security.
CO-CONSPIRATORS AND INVESTIGATIONS
Two additional co-conspirators, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023 to conspiracy charges and have been sentenced.
INVESTIGATION AND PROSECUTION
The FBI Miami Field Office led the investigation, with prosecution by Assistant Chief Scott Armstrong and Trial Attorney Andrew Jaco of the Criminal Division’s Fraud Section.
CONCLUSION
This case sets a crucial precedent for the cryptocurrency market, underscoring that federal securities laws will be rigorously enforced to maintain market integrity. The sentences imposed highlight the severe consequences of securities fraud and wire fraud in the cryptocurrency sector.
About the Author
Destiny Aigbe
Managing Partner
Aigbe Law PLLC | Dark Alpha Capital
A Corporate and Securities Law Firm
With a robust foundation in law and finance, Destiny Aigbe has carved a distinguished career, underpinned by his pivotal role in orchestrating and managing complex transactions that have propelled companies to significant growth and market prominence. As a seasoned attorney and strategic advisor, Destiny has been instrumental in facilitating over $75 million in capital raises, demonstrating a keen acumen for securing funding and fostering investor confidence.
Destiny's leadership in the execution of six successful public listings, through meticulously structured reverse mergers and registration statements, showcases his adeptness in navigating the intricacies of the public markets and his capacity to guide companies through transformative growth phases. His involvement in five mergers as an operator further illustrates his versatile skill set, extending beyond legal expertise to include hands-on management and operational strategy, though these ventures did not involve funding.
Destiny's professional journey is marked by a commitment to excellence and a diverse range of experiences, from representing a wide spectrum of clients including public and private companies, and investment firms, to holding significant roles within the US government. His tenure with the US Department of State and the National Institutes of Health highlights his adaptability and his contribution to the advancement of entrepreneurial ventures in sectors like biotechnology and nanotechnology through strategic funding initiatives.
An alumnus of Vanderbilt University Law School, Destiny focused on Finance and Mergers & Acquisitions, further honing his expertise with a certificate in Law and Business. His foundational education in Finance was obtained with honors from the University of Maryland's Robert H. Smith School of Business, which laid the groundwork for his subsequent achievements in investment banking and legal practice.
Residing in the Washington, D.C. area, Destiny Aigbe continues to leverage his extensive experience and insightful leadership to drive innovation, growth, and success for his clients and the ventures he is involved with.
© Aigbe Law, PLLC