In a major victory for the U.S. Securities and Exchange Commission (SEC), the agency has won a lawsuit against Hydrogen Technology Corp., a California-based company accused of conducting an unregistered securities offering. The company has been ordered to pay $2.8 million in penalties and disgorgement.
SEC wins a case on token price manipulation
According to reports, a $2.8 million settlement has ended a seven-month-long lawsuit between the Commission and a company accused of manipulating crypto prices. In a lawsuit launched by the SEC, a New York District Court judge ruled against Hydrogen Technology Corporation and its former CEO, Michael Ross Kane, on April 20, ordering them to pay $2.8 million in civil penalties and restitution.
In September, the regulatory commission 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.”
Approximately $1.5 million of the settlement amount will be “disgorged” proceeds or illegally obtained gains. In addition, the company is scheduled to pay a $1 million sanction, with CEO Michael Kane paying a $260,000 fine. The remainder, approximately $40,000, consists of prejudgment interest.
According to the filled 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.
Regulatory arms make good on cracking illegal crypto activities
According to the final details available, Hydrogen and Kane are now constrained by the terms of the settlement. These terms prohibit them from contesting the SEC’s charges 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 SEC approval. Kane is still permitted to participate in the broader crypto market, so he can continue to purchase and sell crypto assets for his own profit.
This case exemplifies the regulatory authorities’ ongoing efforts to combat illicit activity in the crypto market. The regulation pursuit assures a fair and transparent trading environment for all market participants.
However, the SEC continues to face increasing opposition from the crypto industry. Paradigm, a Web3 capital firm, has recently expressed concerns regarding the Commission’s crypto regulation strategy.
SEC takes in heat from the crypto community
The U.S. Securities and Exchange Commission has been at the center of controversy in the crypto community in recent years, as it has taken an increasingly aggressive stance toward regulating digital assets.
One of the main points of contention between the regulation arm and crypto enthusiasts is the agency’s classification of most cryptocurrencies as securities, subjecting them to strict registration and compliance requirements. This classification has resulted in a number of high-profile enforcement actions against crypto companies and individuals, including the ongoing case against Ripple Labs over its XRP token.
Many in the crypto community argue that this approach stifles innovation and hinders the industry’s growth. They also claim that the SEC’s lack of clear guidance on the issue creates uncertainty and makes it difficult for businesses to operate within the law. One Twitter user called commission’s approach to crypto regulation “reckless.”
Despite these criticisms, the regulatory arm has shown no signs of backing down from its regulatory efforts. In fact, the agency has recently ramped up its enforcement actions against crypto firms, signaling that it intends to continue to play a central role in shaping the future of the industry.