Crypto firm Hydrogen Tech faces SEC charges for selling unregistered securities

The Cryptosphere has one of its units having some major issues with the regulators.

The US Securities and Exchange Commission has been quite busy these days looking for companies. This time it has prepared the whip against the crypto firm Hydrogen, which it accuses of selling unregistered securities.

Hydrogen’s market maker Moonwalkers Trading and its CEO Tyler Ostern and Michael Ross Kane, former Hydrogen CEO, are included in the charges of alleged manipulation of crypto assets.

According to the press release on 28 September:

“The SEC’s complaint alleges that Kane and Hydrogen, a New York-based financial technology company, started in January 2018, created their Hydro token and then distributed the token publicly through various methods.”

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Hydro market activity hyped by crypto bots

The SEC’s legal feud started when Kane introduced and distributed the Hydro token using various methods such as bounty programs, sales on various trading platforms, airdrops and others.

Further, the SEC’s complaint detailed that the Hydrogen CEO allegedly collaborated with Moonwalkers Trading Limited to falsify the market activity of Hydro-integrating robots. With that arrangement, the Hydro token experienced a massive sale with a bot-supported market.

With the hyped and pre-conditioned market, Hydrogen was able to generate as much as $2 million in profit. Hydrogen was said to be able to hype Hydro and in turn mislead buyers and investors regarding Hydro’s hyper-inflated or artificial market activity.

Instead, the Chief of Enforcement Division’s Market Abuse Unit, Joseph Sansone, said:

“The SEC is committed to ensuring fair markets for all types of securities and will continue to expose and hold market manipulators accountable.”

Hydrogen bites back: SEC claims lack evidence

The SEC verifies assets to determine whether it is a security using a Howie test. With the case filed against Hydrogen, other similar tokens distributed via airdrops may also be labeled as unregistered securities.

With airdrops, tokens are distributed to users. Moreover, the airdrop method is also used to design DAOs or shift responsibility and ownership from the core team to the users.

Hydrogen, in response to the SEC’s allegations, said this problem has been going on for years even without solid evidence. Also, Hydrogen said it will move to counter the case filed by the commission.

On the other hand, Moonwalker CEO Ostern decided to pay $36,750 plus civil fees or penalties to be determined by the court in the later part of the proceeding. Fines were also imposed on Hydrogen’s managing director.

The charges against Hydrogen are very similar to Ripple Labs, which is accused of illegally selling or trading its XRP tokens.

Crypto total market cap at $912 billion on the daily chart | Source: TradingView.com

Featured image from Sciences et Avenir, Chart: TradingView.com