Hydrogen Technology Corporation, a firm accused of manipulating the price of cryptocurrencies, has settled a seven-month-long lawsuit with the Securities and Exchange Commission (SEC) for $2.8 million. The SEC had filed a complaint against Hydrogen and its former CEO, Michael Ross Kane, in September, alleging that they manipulated the volume and price of the firm’s ERC-20 token, Hydro (HYDRO), by using its market maker, Moonwalkers Trading Limited.
On April 20, a New York District Court Judge ordered Hydrogen and Kane to pay $2.8 million in remedies and civil penalties. The payment comprises approximately $1.5 million in “disgorged” profits, which refers to gains made from unlawful conduct, as well as a penalty of more than $1 million. Additionally, Kane agreed to pay an individual fine of approximately $260,000, and the remaining amount is made up of prejudgment interest.
The SEC’s complaint alleged that Kane and Moonwalkers CEO Tyler Ostern worked together to manipulate the volume and price of Hydro’s token, following its distribution through airdrops, bounty programs, and direct-to-market sales in 2018. According to the complaint, Ostern sold the tokens in an “artificially inflated market,” which allowed Hydrogen to net more than $2 million in profit.
A day after the complaint was filed, Ostern settled the case for $41,000. Both Hydrogen and Kane are now bound by the conditions of the settlement, which prevents them from disputing the charges levied against them by the SEC.
As part of the settlement, Hydrogen and Kane are also prohibited from selling any additional cryptocurrency until the Hydro tokens have passed the Howey test and received further approval from the SEC. However, Kane is still permitted to participate in the wider cryptocurrency market, meaning he can still buy and sell crypto assets for personal gain.
The settlement of the lawsuit marks a significant win for the SEC, which has been cracking down on cryptocurrency-related fraud and misconduct. The case also serves as a reminder to cryptocurrency companies and their executives to comply with securities laws and regulations.
It is worth noting that the Howey test mentioned in the settlement is a legal test used to determine whether an asset is a security. If an asset meets the criteria of the test, it is considered a security and must comply with securities laws and regulations. This means that Hydrogen and Kane cannot sell any additional cryptocurrency until the SEC approves the Hydro tokens as a security.
In conclusion, the settlement of the cryptocurrency manipulation lawsuit brought against Hydrogen Technology Corporation and its former CEO is a significant development in the ongoing effort to regulate the cryptocurrency market. The settlement serves as a reminder to companies and their executives to comply with securities laws and regulations to avoid legal action by regulators.