The cryptosphere has one of its entities running into some major issues with the regulators.
The U.S. Securities and Exchange Commission has been quite busy these days going after companies. This time, it has its whip readied against crypto firm Hydrogen, who it accuses of selling unregistered securities.
Hydrogen’s market maker Moonwalkers Trading and its CEO Tyler Ostern and Michael Ross Kane, former Hydrogen CEO, are included in the charges for alleged manipulation of crypto assets.
According to the press release on September 28:
“The SEC’s complaint alleges that starting in January 2018, Kane and Hydrogen, a New York-based financial technology company, created its Hydro token and then publicly distributed the token through various methods.”
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Hydro Market Activity Hyped By Crypto Bots
SEC’s legal feud started when Kane introduced and distributed the Hydro token using different methods such as bounty programs, selling on varied trading platforms, airdrops, and others.
Further, SEC’s complaint detailed that allegedly the Hydrogen CEO partnered with Moonwalkers Trading Limited to fake out the market activity of Hydro integrating bots. With that scheme, Hydro token experienced a massive sell-off with a bot-backed market.
With the hyped and pre-conditioned market, Hydrogen was able to generate as much as $2 million in profit. Hydrogen was said to be able to hype Hydro and in turn, mislead buyers and investors regarding Hydro’s hyper-inflated or artificial market activity.
In lieu of this, the Chief of Enforcement Division’s Market Abuse Unit, Joseph Sansone said:
“The SEC is committed to ensuring fair markets for all types of securities and will continue to expose and hold market manipulators accountable.”
Hydrogen Bites Back: SEC Claims Lack Proof
SEC verifies assets to determine if it’s a security by way of a Howie test. With the case filed against Hydrogen, other similar tokens that are distributed via airdrops may be labeled as unregistered securities as well.
With airdrops, tokens are distributed to users. More so, the airdrop method is also utilized for designing DAOs or shifting the responsibilities and ownership from the main team to its users.
Hydrogen, in response to SEC’s allegations, said that this issue has been going on for several years even without solid evidence. More so, Hydrogen said that they will move to counter the case filed by the commission.
On the other hand, Moonwalkers CEO Ostern decided to pay $36,750 plus civil fees or penalties that are to be set by the court at the later part of the proceeding. Penalties were also filed against Hydrogen’s CEO.
The charges filed against Hydrogen are closely similar to that of Ripple Labs, which is is accused of illegal sale or transactions of its XRP tokens.
Crypto total market cap at $912 billion on the daily chart | Source: TradingView.com Featured image from Sciences et Avenir, Chart: TradingView.com