SEC wins $2.8 million in lawsuit over alleged price manipulation of crypto tokens

by · April 23, 2023

A seven-month lawsuit between the U.S. Securities and Exchange Commission and a firm that allegedly manipulated the price of cryptocurrencies has ended with a $2.8 million settlement.

On April 20, a New York District Court judge ruled against Hydrogen Technology Corporation and its former CEO Michael Ross Kane in a case brought by the Securities and Exchange Commission (SEC), ordering them to pay $2.8 million in legal remedies and civil penalties.

The sum consists of approximately $1.5 million in “extinguished” profits — which refers to gains from illegal conduct — as well as a penalty of more than $1 million.

In addition, Hydrogen CEO Michael Kane agreed to pay an individual fine of around $260,000. The remaining amount consists of pre-assessment interest.

In September 2022, the SEC filed its complaint alleging that Kane used Hydrogen’s market maker Moonwalkers Trading Limited to conduct a scheme that manipulated the volume and price of the ERC-20 token Hydro (HYDRO).

The SEC alleged Kane and Moonwalker CEO Tyler Ostern worked “to create the false appearance of robust market activity” after the distribution of Hydrogen’s Hydro tokens using airdrops, bounty programs and direct-to-market sales in 2018.

According to the SEC’s complaint, Ostern sold the tokens in an “artificially inflated market” that netted Hydrogen more than $2 million in profits.

A day after the complaint was filed, Ostern agreed to settle the case for $41,000.

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Both Hydrogen and Kane are now bound by the terms of the settlement, which prevents them from further contesting the charges brought against them by the SEC.

Kane and the firm will be prohibited from selling additional cryptocurrency until the Hydro tokens pass the Howey test and receive further approval from the SEC.

Kane is still allowed to participate in the broader cryptocurrency market, meaning he can still buy and sell crypto assets for personal gain.

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