A Florida judge has sentenced Michael Kane, the former CEO of Hydrogen Technology Corporation, to roughly four years behind bars after a guilty plea.

According to a notice from the United States Justice Department, on June 24, a federal judge sentenced Kane to 45 months in prison for securities fraud related to a crypto price manipulation scheme. Shane Hampton, Hydrogen Technology’s former Head of Financial Engineering, received a sentence of 35 months for similar crimes.

“[F]or the first time, a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulating cryptocurrency prices was securities fraud,” said Principal Deputy Assistant Attorney General Nicole Argentieri. “This prosecution and the sentences imposed today should serve as a warning: The Criminal Division will not hesitate to use all tools at its disposal — including the federal securities laws — to protect the integrity of cryptocurrency markets.”

The U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Kane and Hydrogen Technology in September 2022, alleging the former CEO used the firm’s market maker to perpetrate a scheme manipulating the volume and price of the company’s Hydro (HYDRO) token. In April 2023, a New York judge ordered Kane and the firm to pay $2.8 million in remedies and civil penalties. At roughly the same time, Kane’s and Hampton’s criminal indictments in the Southern District of Florida were announced.

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Kane pleaded guilty to one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud and had been awaiting sentencing since November 2023. A jury convicted Hampton of similar charges in February. Two other former Hydrogen Technology executives involved in the scheme, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023.

Crypto in the courts

The criminal case was the latest move by U.S. officials to target cryptocurrencies that the SEC considered securities under its purview. Though the commission has civil cases pending against crypto firms, including Coinbase, Ripple, Kraken and Binance, it has reportedly abandoned attempts to classify Ether (ETH) as a security.

Security firm Consensys reported on June 19 that the SEC did not intend to pursue an enforcement action over Ether. The company filed a lawsuit against the SEC in April after receiving a Wells notice from the regulator.

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