Two executives of financial technology company Hydrogen Technology received a prison term for their role in inflating the firm’s cryptocurrency, HYDRO.

In a statement, the U.S. Department of Justice (DOJ) says that Hydrogen Technology co-founder and CEO Michael Kane of Miami Beach, Florida and Head of Financial Engineering Shane Hampton of Philadelphia, Pennsylvania were sentenced for orchestrating cryptocurrency securities fraud and wire fraud schemes.

The two men are accused of hiring South African software assisted market making firm Moonwalkers Trading Limited to inflate the price of HYDRO on a US-based crypto exchange using a trading bot that flooded the market with fake and fraudulent orders between October 2018 and April 2019.

The duo and their conspirators then executed approximately $7 million in wash trades and $300 million in spoof trades through the bot and eventually profited approximately  $2 million from selling HYDRO.

The DOJ says the case is the first criminal jury trial that found cryptocurrency to be a security and manipulating cryptocurrency prices is a securities fraud.

“The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law. Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security.”

Kane was sentenced to a jail time of three years and nine months while Hampton will spend two years and 11 months behind bars.

 

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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The largest US-based crypto exchange by trading volume is taking on two of the country’s top financial regulators in a new lawsuit.

In a lawsuit filed in Washington D.C. today, Coinbase accuses the U.S. Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Corporation (FDIC) of attempting to “cripple” the crypto industry.

“For years, the SEC has refused to articulate a consistent or coherent view on the securities laws’ application to digital assets.

The agency’s latest position—that it has sweeping authority over the vibrant and rapidly expanding digital asset industry—has no basis in the securities laws and has never coherently been explained by the agency. Instead, the SEC has waged a scorched-earth enforcement war on digital-asset firms that, in conjunction with efforts by other financial regulators to de-bank crypto firms, is designed to cripple the digital-asset industry.”

In the suit, Coinbase describes the SEC’s classification of certain cryptos as securities as “inapt.”

“It has not explained the contradictory congressional testimony of its Chair, who declared scarcely three years ago that the agency lacks authority to regulate digital asset exchanges like Coinbase. It has refused to modify its rules to make them workable for digital asset firms. And it has claimed that it need not even allow the $2 trillion digital asset industry to comply with its existing rules.”

Coinbase also claims that the SEC failed to comply with its Freedom of Information Act (FOIA) requests.

“Seeking to enforce FOIA’s check on administrative opacity, Coinbase retained Plaintiff History Associates to request that the SEC provide records concerning three SEC investigations into digital-asset firms and entrepreneurs—with the goal of divining how the SEC views its newfound, sweeping, and unlawful authority.

One of those investigations focused on Ether—the digital asset used in Ethereum—which the SEC publicly announced is not a security in 2018. That investigation was recently closed by the agency, and the other two investigations have been closed for years. Yet the SEC withheld nearly all responsive records based on boilerplate assertions that these cold cases might relate to some unspecified, ongoing investigations. Those refusals violated the SEC’s FOIA obligations.”

Earlier this month, Coinbase chief legal officer Paul Grewal described the SEC as “bent on choking” the crypto industry.

 

Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any losses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.

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