SEC Settles $2.8M Lawsuit, Former Chief Claims More Enforcement to Follow
- The United States SEC won a 7-month long lawsuit against Hydrogen Technology Corp. and its CEO, Michael Ross Kane, last week.
- The company will have to pay $2.8 million, including $1.5 million in disgorgement, $1 million in fines, while Kane will have to pay around $260K.
- Hydrogen will not be allowed to participate in the sale of securities without approval from the SEC and passing the Howey Test.
- John Reed Stark, former Chief of the US SEC’s Office of Internet Enforcement, said that the regulator is preparing for additional enforcement actions.
The United States Securities and Exchange Commission (SEC) has been battling crypto firms following the 2021 crypto market bull run due to an increase in the number of scams and price manipulation activities. Interestingly, the securities regulator has secured a win against Hydrogen Technology Corp. and its Chief Executive Officer, Michael Ross Kane, in a lawsuit that lasted over 7 months and was concluded last week.
According to court documents, the judge has ruled in favor of the SEC, and as a result, Hydrogen Technology Corp. will have to pay around $2.8 million as per the rulings. The lawsuit was filed by the regulator seven months ago, wherein it claimed that Hydrogen was involved in the price manipulation of cryptocurrencies, an activity in which entities influence the price of digital assets to make profit off them.
The $2.8 million includes around $1.5 million in disgorgement, i.e., the money gained from unlawful activities, along with $1 million in penalties for conducting illicit activities and harming investors. The SEC claims that Hydrogen used unlawful tactics to inflate the price of “Hydro” tokens and offered the sale of securities by registering them with the regulator.
A New York federal judge agreed to the settlement of the dispute between the SEC and Hydrogen Technology Corp., while the CEO of the latter, Kane, consented to end the legal dispute.
Moreover, in the lawsuit filed by the US regulator against the company and its CEO in September last year, the agency claimed that they paid a third party to manipulate the trade of the company’s Hydro token in order to artificially boost its price. The third party was Tyler Ostern, who also reached an agreement with the SEC to settle for a $41,000 fine.
As a part of the settlement, Hydrogen or Kane will not be allowed to participate in the sale of securities or engage in similar activities without the approval of the SEC and passing the Howey Test, a test designed to confirm whether an asset is a security or a commodity. Meanwhile, Kane has been allowed to trade cryptocurrencies without any issues for his personal usage.
The corporation and its executives are bound by the settlement agreement to not refute or agree to the accusations that the SEC had levied against them in the lawsuit. The lawsuit added that Kane, who was also the person behind Hedgeable Inc.—an SEC registered investment adviser—needed fresh capital for his company and created Hydrogen as a result of the crypto bull market of 2017.
Following the bull market, the company minted more than 11 billion Hydro tokens, which were distributed as rewards to employees, retail investors, and those who promoted the project.
More SEC Lawsuits to Come?
John Reed Stark, former Chief of the US SEC’s Office of Internet Enforcement, recently stated that the regulator is planning more lawsuits against crypto companies in the near future to protect investors from manipulation and other similar activities.
“We’re in the midst of a regulatory onslaught against crypto,” says Stark, while adding:
“Every day, it seems like there’s a new lawsuit targeting the industry. The SEC is not going to stand idly by, especially when investors are at risk. Investors may not like the rules but, just like seatbelt laws, sometimes investors need protection from themselves.”
As reported earlier by BitcoinWisdom, the SEC sent a “Wells Notice” to the leading exchange in the US, Coinbase, regarding its staking services claiming that these are security offerings. On the other hand, Congressmen are not happy with crypto firms and capital leaving the US due to the enforcement tactics of the regulator under the leadership of Gary Gensler.
United States Representative Warren Davidson filed legislation in Congress to fire the Chairman of the US SEC. Davidson claims that the legislation aims to “correct a long series of abuses” against crypto investors and companies.