SEC charges Hydrogen, former CEO over alleged cryptocurrency manipulation

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SEC charges Hydrogen, former CEO over alleged cryptocurrency manipulation

The SEC has charged Hydrogen Technology Corp., a fintech firm, and its former CEO, Michael Ross Kane, with illegally manipulating 'crypto asset securities'.

The SEC said the company offered unregistered offers and sales of crypto asset securities in the form of the HYDRO token, which is miniature with a fully diluted market cap of $416,000. The agency alleges that hydrogen oversaw a scheme to manipulate trade volume and price of HYDRO that netted more than $2.2 million in profits.

The SEC also said that Tyler Ostern, who owns Moonwalkers Trading Limited, a self-described market-making firm for Hydrogen, also participated in the alleged scheme.

The SEC alleges that Kane used Moonwalkers Trading to create the illusion of strong market activity for the HYDRO token, allowing Hydrogen to sell the token into an 'artificially inflated market' for profit.

The complaint alleges communication between Ostern and Kane that Moonwalkers Trading attempted to manipulate the price of HYDRO for Kane.

The SEC's Enforcement Division said it was evaluating whether it is time to conduct a market activity.

The suit drew fire from crypto experts who contend that the SEC is overstepping its authority by treating tokens issued through airdrops as securities.

Carolyn Welshhans, the assistant director of the SEC's Enforcement Division, said the agency's top enforcement officer was working with the agency to determine whether it should file a criminal complaint.

The SEC's bounty program is regarded as a security investment contract rather than its airdrop.

bounties' where users were rewarded with tokens for a promotional action count for that clause. Not the generic airdrop, not the generic airdrop, said Adam Cochran, a Yearn Finance contributor.

't within the scope of the actual Howey analysis, just distributions through bounties and sales,' said Jeremy Sklaroff, general counsel of Celestia.

The SEC filed its suit in Manhattan, U.S. District Court. The lawsuit alleges that Hydrogen, Kane, and Ostern violated the securities law's registration, antifraud, and market manipulation measures.

Ostern has agreed to a fine of $36,750 plus prejudgment interest of $5,118 and future monetary penalties determined by the court in exchange for admitting no wrongdoing. Ostern also agreed to restrictions that prevented him from participating in future offers of securities or penny stocks.

The SEC wants to have Kane disgorged ill-gotten gains, civil penalties, and enjoinments preventing him from engaging in offerings of crypto securities or other offerings, and acting as a director or executive in the future.