SEC charges Hydrogen, former CEO over alleged cryptocurrency manipulation

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SEC charges Hydrogen, former CEO over alleged cryptocurrency manipulation

The SEC on Sept. 28 charged Hydrogen Technology Corp., a financial tech firm, and its former CEO, Michael Ross Kane, with illegally manipulating 'crypto asset securities'.

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

The SEC said Tyler Ostern, the CEO of Moonwalkers Trading Limited, also participated in the alleged scheme, as well as Moonwalkers Trading Limited, the self-described market-making firm for hydrogen.

The SEC alleges that Kane sold the HYDRO token to Moonwalkers Trading to create the illusion of robust market activity for the HYDRO token, enabling Hydrogen to sell the token to an 'artificially inflated market' for profit.

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

The SEC's Enforcement Division said yesterday that the agency was carrying out all of its market activity.

Crypto experts argues that the SEC is overstepping its authority by treating tokens issued through airdrops as securities.

Carolyn Welshhans, associate director of the SEC's Enforcement Division, said in a statement.

Some argued that the SEC is treating Hydrogen's bounty program as a security investment contract rather than its airdrop.

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

'' within the scope of the actual Howey analysis, just distributions through bounties and sales, '' said Sklaroff, general counsel of Celestia.

The SEC filed the suit in Manhattan's U.S. District Court. The suit 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 preventing him from participating in future offers of securities or penny stocks.

The SEC is seeking judgment over Kane, including an order to disgorge ill-gotten gains, civil monetary penalties, and enjoinments prohibiting him from pursuing offers of crypto securities or other offerings or acting as a director or executive in the future.