Hydrogen to Pay $2.8m in Damages
In September 2022, the US Securities and Exchange Commission (SEC) brought charges against Hydrogen Technologies, Michael Ross Kane, and Tyler Ostern, the CEO of Moonwalkers Trading Limited.
After months of litigation, the court finally released the final judgment on April 21, 2023. The judgment was made under multiple sections of the Securities and Exchange Act. As per the court's ruling, Hydrogen is required to pay a total of $2.76 million to the SEC in damages.
The court ordered Hydrogen to disgorge about $1.5 million in illegally earned net profits, pay approximately $244,500 in interest, and pay another $1.04 million as a civil penalty. Kane has been sentenced to pay $45,800 in net profits, $7,300 in interest, and $207,000 as a civil penalty, for a total of $260,200.
Hydrogen will settle the damages in four installments, while Kane must pay damages within twelve installments. The exact terms of the settlement will be determined by the parties involved.
The SEC claims that Kane and Hydrogen created the Hydro token in January 2018 and distributed it to the public through various methods, including airdrops (giving it away for free), bounty programs (paying users for promotion), employee compensation, and direct sales on crypto asset trading platforms.
The defendants were also accused of hiring Moonwalkers in October 2018 to create a false appearance of robust market activity for Hydro through the use of customized trading software or "bot".
An Important Win for the SEC
Market manipulation is a significant issue for the crypto industry, with regulators closely monitoring this type of activity. The SEC's victory, in this case, demonstrates that the commission is committed to enforcing the laws and regulations governing the crypto industry.
The judgment against Hydrogen and Kane also serves as a warning to other companies and individuals involved in crypto asset securities. Regulators are watching closely and will take action against those who violate the law.
Unsurprisingly, the SEC recently issued a call for financial professionals to exercise heightened scrutiny when recommending complex or high-risk products to clients, including cryptocurrencies and any type of crypto asset.
This win is of radical importance for the SEC, which has been under fire for some time in the crypto industry, for its lack of clarity and transparency in terms of digital asset regulation. Recent examples include the ongoing lawsuit with Ripple or SEC Chairman Gary Gensler's recent testimony in front of a committee.