In an official press release dated September 28th, the Securities and Exchange Commission (SEC) has leveled allegations against 2 firms and their CEOs.
The SEC announced its charge against Hydrogen, its former CEO, Michael Ross Kane, and Tyler Ostern, the CEO of Moonwalkers for market manipulation and sale of unregistered securities. The commission added that Hydrogen yielded $2 million in profits as a result of the sale of Hydro.
The regulatory authority alleged that Kane and Hydrogen created Hydro and ‘publicly distributed the token through various methods…’ It adds that they hired a South African firm Moonwalkers in 2018 which used bots to inflate market trading volume. Then, they sold Hydro in that ‘inflated market,’ reaping profits of over $2 million.
Moonwalkers are charged with Wash trading. This is an unofficial term denoting the creation of artificial trade volume
SEC explicitly mentioned the methods used by Hydrogen to ‘effectuate’ the ‘scheme’: airdrops, bounty programmes, and direct sale. Unlike previous charges against crypto firms which involved Initial Coin Offerings (ICOs), this time, airdrops are also treated like violations.
The press release also includes statements about the case made by top officials justifying the charges and emphasizing the purpose of enforcement.
Carolyn M. Welshhans, Associate Director of the SEC’s Enforcement Division stated that “Companies cannot avoid the federal securities laws by structuring the unregistered offers and sales of their securities as bounties, compensation, or other such methods,”
“As we allege, the defendants profited from their manipulation by creating a misleading picture of Hydro’s market activity,” added Joseph Sansone, who is the chief of the market abuse unit.
Ostern ‘consented’ to the judgment which prohibits him from ‘violating these provisions’; ‘participating in future security offerings’. He has been ordered to pay $36,750 ‘in disgorgement’; $5,118 in ‘prejudgment interest’. The civil and monetary fines are yet to be slapped.
