A $2.8 million settlement has ended a seven-month-long lawsuit between the United States securities regulator and a company accused of manipulating the price of cryptocurrencies.
In a case brought by the Securities and Exchange Commission (SEC), a New York District Court judge declared against Hydrogen Technology Corporation and its former CEO, Michael Ross Kane, on April 20, ordering them to pay $2.8 million in remedies and civil penalties.
The amount consists of approximately $1.5 million in “disgorged” profits, which alludes to illegal gains, and a penalty of more than $1 million.
In addition, Michael Kane, the CEO of Hydrogen, consented to pay a sanction of approximately $260,000. The remainder is comprised of prejudgment interest.
In September, the SEC filed a complaint alleging that Kane used Hydrogen’s market creator, Moonwalkers Trading Limited, to manipulate the volume and price of its ERC-20 token, Hydro (HYDRO).
Following the distribution of Hydrogen’s Hydro tokens through airdrops, bounty programs, and direct-to-market sales in 2018, the SEC alleged that Kane and Moonwalkers CEO Tyler Ostern worked “to create the false appearance of robust market activity.”
According to the SEC’s complaint, Ostern sold the tokens in an “artificially inflated market” that resulted in Hydrogen earning more than $2 million in profit.
The day following the filing of the complaint, Ostern agreed to resolve the case for $41,000.
Hydrogen and Kane are now constrained by the terms of the settlement, which prohibit them from contesting the SEC’s allegations further.
Kane and the company will not be permitted to sell additional cryptocurrencies until the Hydro tokens have passed the Howey test and obtained additional approval from SEC.
Kane is still permitted to participate in the broader cryptocurrency market, so he can continue to purchase and sell crypto assets for profit.