The Department of Justice (DoJ) has recently unsealed an indictment in Miami, revealing charges against two U.S. citizens and a South African national for their alleged involvement in a cryptocurrency market manipulation scheme.
The scheme revolves around the manipulation of the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation. In addition, two other individuals were charged in separate documents for their roles in the scheme.
Alleged market manipulation scheme discovered by the DoJ
Court documents reveal that from June 2018 to April 2019, Michael Kane, Shane Hampton, and George Wolvaardt allegedly conspired to manipulate the market for HYDRO, a token on the Ethereum blockchain platform.
The trio is accused of creating a false appearance of supply and demand for HYDRO to induce other market participants to trade at prices, quantities, and times they otherwise would not have traded.
The defendants reportedly used a trading bot to place thousands of orders they did not intend to execute, referred to as “spoof orders.”
The bot was also used to make thousands of “wash trades,” where it bought and sold tokens to itself through the same account, says the DoJ. The co-conspirators allegedly reaped $2 million in profit through their sales of HYDRO at artificially inflated prices.
Key figures in the crypto scheme
Kane, who served as co-founder and CEO of Hydrogen Technology, and Hampton, the company’s Chief of Financial Engineering, allegedly hired Wolvaardt, the Chief Technology Officer for Moonwalkers Trading Limited, to manipulate the market for HYDRO.
Moonwalkers Trading Limited, a self-described “market-making” firm, purportedly designed the trading bot used in the scheme.
Tyler Ostern, the former CEO of Moonwalkers, and Andrew Chorlian, a blockchain engineer at Hydrogen Technology, have also been charged for their participation in the scheme.
Kane, Hampton, and Wolvaardt each face one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud.
If convicted, the DoJ says they each face a maximum penalty of five years in prison on the conspiracy to commit securities price manipulation count and 20 years in prison on each of the other charged counts.
Ostern and Chorlian are each charged with one count of conspiracy to commit securities price manipulation and wire fraud. If convicted, they each face a maximum penalty of five years in prison.
The DoJ shared that the Federal Bureau of Investigation (FBI) is currently investigating the case, with various representatives from the Justice Department’s Criminal Division, the Southern District of Florida, and the FBI’s Criminal Investigative Division involved.
Trial Attorney Andrew Jaco, Assistant Chief Scott Armstrong of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney Eric Morales for the Southern District of Florida are prosecuting the case.
