Five Charged By DOJ Over Crypto Scheme

Five Charged By DOJ Over Crypto Scheme

The United States Department of Justice (DOJ) has charged five individuals who allegedly manipulated the market in relation to a scheme involving the ERC-20 Hydro (HYDRO) token. 

The Allegations and Charges

According to the DOJ, from June 2018 through April 2019, Michael Ross Kane, the former CEO of Hydrogen Technology Corp.; Shane Hampton, Hydrogen’s chief of financial engineering; and George Wolvaardt defrauded market participants looking to trade the Hydro tokens issued by Hydrogen. 

The DOJ alleges that Wolvaardt, the chief technology officer for a market-making firm called Moonwalkers Trading Limited, designed a trading bot that executed several high-value “spoof orders” at obscure intervals to make it appear as though there was high demand for the token. The bot also bought and sold large volumes of the token from the same account — a practice known as wash trading.

If found guilty on all charges, Kane, Hampton, and Wolvaardt each face a maximum penalty of five years imprisonment in relation to the conspiracy to commit securities price manipulation charge and a staggering 20 years in prison on each of the other charges. Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer from Hydrogen Technology Corp., were also charged for their involvement in the alleged manipulation scheme. Ostern and Chorlian each face a maximum penalty of five years in prison if found guilty.

The Alleged Scheme

The DOJ claims that following the alleged artificial manipulation of the price of Hydro, the co-conspirators sold large chunks of their holdings, netting an approximate total of $2 million in ill-gotten profits. The indictment also alleges that the co-conspirators engaged in a pattern of deceptive conduct that included false and misleading statements about the demand for and value of Hydro tokens.