Fintech engineer grounded by crypto fraud caper, including $300m spoof trades
Fourth conviction in South Africa-linked scheme
The head of financial engineering at fintech platform Hydrogen Technology has been convicted of manipulating the price of a security and scheming to defraud investors in the company's cryptocurrency, HYDRO.
According to the verdict from a federal jury in the Southern District of Florida, Shane Hampton worked with his co-conspirators over several months to manipulate the price of HYDRO.
They hired a South Africa-based company to run an automated trading system - or "bot" - to manipulate the price of HYDRO on a cryptocurrency exchange in the US by flooding the market with fake and fraudulent orders between October 2018 and April 2019, according to a statement from the Department of Justice.
Hampton joins company CEO Michael Kane, who pleaded guilty to the same charges and is awaiting sentencing. Also pleading guilty to conspiracy to commit securities price manipulation and wire fraud is Andrew Chorlian, another engineer at Hydrogen Technology, who is awaiting sentencing. Moonwalkers Trading CEO Tyler Ostern pleaded guilty to conspiracy to commit securities price manipulation and wire fraud, and has been sentenced to two years in prison.
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The group executed $7 million in so-called "wash trades," in which one party sells and buys stock or other financial instruments at the same time, thus creating the illusion that there is more market activity than in reality is taking place. The HYDRO conspirators also placed more than $300 million in "spoof trades" for HYDRO through the bot. Together the techniques duped HYDRO buyers such that the group could sell the company's own holding of the cryptocurrency for more than $1.5 million over the course of seven months.
According to Hydrogen Technology, its main line of business is providing a platform for running and managing fintech apps.
Cryptocurrencies have become a honeypot for fraudsters in recent years. In November last year, Sam Bankman-Fried, the founder and former CEO of crypto exchange FTX and trading firm Alameda Research, was found guilty of seven criminal charges, including wire fraud against customers via his companies.
In September last year, Pablo Renato Rodriguez of Irvine, California, was sentenced to 12 years in prison for founding AirBit Club, a $100 million cryptocurrency Ponzi scheme. ®