SEC Charges Overview

The United States Securities and Exchange Commission (SEC) has taken decisive action, unveiling charges against Hydrogen Technology Corporation and its trading partner, Moonwalkers Trading Limited. The regulators allege that these entities engaged in a scheme to pump up the trading volume and price of Hydro tokens. These charges were detailed in a September 28 announcement, which revealed the sensational details of what’s being considered the latest chapter in crypto market manipulation.

The Players Involved

At the center of this alleged scheme is former Hydrogen CEO Michael Ross Kane, who reportedly employed Moonwalkers and its head honcho Tyler Ostern. Their prime directive? To conjure an illusion of vigorous market activity after distributing Hydro tokens through rather creatively titled methods like airdrops and bounty programs back in 2018. It seems their tactics paid off, resulting in a hefty $2 million profit from their manipulative sales.

SEC’s Allegations

According to Joseph Sansone, the SEC’s top dog for market abuses, the defendants have allegedly spun a yarn of false market activity. “As we allege, the defendants profited from their manipulation by creating a misleading picture of Hydro’s market activity,” Sansone stated. This indicates a serious breach of U.S. securities laws, and the SEC is hot on the trail to hold these market manipulators accountable for their actions.

Money Talks, But At What Cost?

The SEC uncovered that Ostern agreed to forfeit over $40,000 in ill-gotten gains, pending a New York federal court’s approval. Meanwhile, Kane is also in the hot seat, and the SEC is pursuing actions to prevent him from holding any officer or director roles in the future. This highlights the SEC’s commitment to ensuring a fair playing field for all types of securities—crypto included.

Crypto Community’s Backlash

Although the SEC is targeting what appears to be classic market manipulation, many from the crypto community are displeased, claiming this is nothing short of regulation via enforcement. Jake Chervinsky from the Blockchain Association voiced concerns that the SEC’s expansive reach, capitalizing on terms like ‘investment,’ is stretching the boundaries of its authority. This sentiment reflects the ongoing debate about the SEC’s role in governing the ever-evolving world of cryptocurrency.

What’s Next for Airdrops?

Despite the SEC’s ongoing battle against crypto-related violations, their stance on airdrops remains murky at best. Commissioner Hester Peirce hinted back in February 2020 that token airdrops could potentially be viewed as offerings of securities. Therefore, those considering airdrop distributions should tread carefully—the regulatory waters are choppy, and even freebies might not be free from scrutiny under securities law.