The Securities and Exchange Commission has recently declared victory against the Hydrogen Technology Corporation and Tyler Ostern as CEO of Moonwalkers Trading Limited. The case involved the illegal offering and sale of crypto assets, known as “Hydro,” The scheme involved manipulating the trading volume of Hydrogen and its price. Hydrogen made over $2 million from the scheme. Hydrogen and Kane are now required to pay almost $3 million in disgorgement and prejudgment interests, as well as penalties, under the settlement. But how did this happen? What was the action that led to this heavy fine?
Hydrogen Technology Corporation Deception
According to SEC’s complaint the story began when Kane and Hydrogen – a financial technology firm based in New York – created the Hydro Token in January 2018. The token was distributed publicly through various methods. Was it just the simple introduction of a new crypto-asset to the market that was at issue? Far from it.
After the Hydro token was distributed, Kane and Hydrogen employed Moonwalkers, an South Africa-based agency. “market making” In October 2018, a firm. Hydro’s market activity was inflated by the firm’s trading software. The market was made to dance by a puppeteer. Hydrogen then sold Hydro into this artificially inflated market, reaping profits.
The Settlement of the Case and Its Consequences
Hydrogen and Kane did not admit or deny the SEC’s allegations. They simply agreed to final judgments. The final judgments resolved all claims, and they were permanently barred from violating certain sections of the Securities Act of 1935 and Securities Exchange Act of 1974 and Rule 10b-5. The same thing would happen if a person was banned from a casino for cheating at a poker table.
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Hydrogen was ordered by the court to pay $1,516,703.53, $244,531.98, prejudgment interests, and a $1,035,000 civil penalty. Kane also had to pay $45,818.79 in disgorgement, $7,387.25 in prejudgment, and $207,000 as civil penalties. Kane also was barred from serving as a director of an officer in a public company.
Tyler Ostern: The case against him
Ostern was previously found guilty by consent of a prior judgment on September 29th, 2022. The court permanently prohibits Ostern from violating the Securities Act or the Exchange Act. It also prevents him from participating to future securities offerings. He is ordered to pay disgorgement of $36,750 and interest prejudgment of $5,118. The court will decide the civil monetary penalties at a later time. Ostern agreed to a final judgement that did not impose civil financial penalties as a result of his cooperation with SEC’s investigations.
Sonia G. Torrico, Kathleen Hitchins and Joseph Sansone were in charge of the SEC investigation, which was overseen by Paul Kim, Carolyn M. Welshhans and Joseph Sansone. Nick Margida was in charge of the SEC litigation, and James Connor and Olivia Choe were supervising.
This case serves to remind us of the possible pitfalls and the consequences of market manipulating, in particular on the rapidly evolving market for crypto assets. This case emphasizes the importance for all participants in the market of maintaining transparency and adhering to the law.