In a historic case prosecuted by the US Department of Justice (DOJ), two individuals have been found guilty of manipulating the price of a cryptocurrency classified as a "security" and conspiring to defraud investors by purchasing Hydrogen Technology’s HYDRO token.

The federal jury's decision led to substantial prison sentences for the defendants and established a significant legal precedent. This marks the first instance in a federal criminal trial where a jury affirmed that a cryptocurrency qualifies as a security and that manipulating its price constitutes securities fraud.

The allegations detailed in court documents and trial evidence state that Kane, co-founder and CEO of Hydrogen Technology, and Hampton, the company's Head of Financial Engineering, engaged Moonwalkers Trading Limited from South Africa to manipulate HYDRO's price on a US-based digital asset exchange using a trading bot. Between October 2018 and April 2019, they allegedly executed approximately $7 million in "wash trades" and placed over $300 million in "spoof trades" for HYDRO.

These manipulative tactics, including flooding the market with fake orders, aimed to deceive retail investors into buying HYDRO at artificially inflated prices, according to the DOJ. The indictment also claims the defendants and their accomplices profited around $2 million from HYDRO sales over ten months.

Hampton received a sentence of two years and 11 months in prison, while Kane was sentenced to three years and nine months.

Principal Deputy Assistant Attorney General Nicole M. Argentieri highlighted the case's significance, emphasizing that it marks the first jury verdict in federal criminal court establishing cryptocurrency as a security and manipulating its prices as securities fraud. The guilty pleas of co-conspirators Andrew Chorlian and Tyler Ostern in May 2023 further corroborated the prosecution's case.

This landmark ruling underscores a pivotal moment in the crypto market's legal landscape, signaling severe consequences for cryptocurrency price manipulation. As the industry continues to evolve, this case underscores the need for clear regulatory frameworks to foster innovation and market integrity.