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Monday, April 24, 2023

Five Individuals Charged in $2M Virtual Asset and Securities Manipulation Scheme

An indictment was unsealed today in Miami charging two U.S. citizens and a South African national with conspiring to manipulate the market for HYDRO, a virtual asset created by the Hydrogen Technology Corporation. Two other individuals were also charged in separate charging documents for their roles in the scheme filed in the Southern District of Florida.   

According to court documents, from around June 2018 through April 2019, Michael Kane, 38, of Miami; Shane Hampton, 31, of Philadelphia; and George Wolvaardt, 38, of Johannesburg, South Africa, allegedly conspired to manipulate the market for HYDRO, a token on the Ethereum blockchain platform, and defraud market participants by creating the false appearance of supply and demand for HYDRO to induce other market participants to trade at prices, quantities, and times that they otherwise would not have traded. The defendants allegedly used a trading bot to place thousands of orders that they did not intend to execute, or “spoof orders,” and thousands of orders where the bot bought and sold tokens to itself through the same account, or “wash trades.” The co-conspirators allegedly reaped $2 million in profit through their sales of HYDRO at artificially inflated prices.  

As alleged in the indictment, Kane was the co-founder and CEO of Hydrogen Technology and Hampton was the Chief of Financial Engineering for the company. Wolvaardt was the Chief Technology Officer for Moonwalkers Trading Limited, a self-described “market-making” firm that purportedly designed the trading bot and was hired by Kane and Hampton to manipulate the market for HYDRO.

Relatedly, Tyler Ostern, 29, of Coos Bay, Oregon, the former CEO of Moonwalkers, and Andrew Chorlian, 29, of New York, New York, a blockchain engineer at Hydrogen Technology, were also charged for their participation in the scheme.

Kane, Hampton, and Wolvaardt are each charged with one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. If convicted, they each face a maximum penalty of five years in prison on the conspiracy to commit securities price manipulation count and 20 years in prison on each of the other charged counts. Ostern and Chorlian are each charged with one count of conspiracy to commit securities price manipulation and wire fraud. If convicted, they each face a maximum penalty of five years in prison.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division, U.S. Attorney Markenzy Lapointe for the Southern District of Florida, Assistant Director Luis Quesada of the FBI’s Criminal Investigative Division, and Special Agent in Charge Jeffrey B. Veltri of the FBI Miami Field Office made the announcement.

The FBI is investigating the case.

Trial Attorney Andrew Jaco and Assistant Chief Scott Armstrong of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Eric Morales for the Southern District of Florida are prosecuting the case.

If you believe you are a victim in this case, please contact the Fraud Section’s Victim Witness Unit toll-free at (888) 549-3945 or by email at victimassistance.fraud@usdoj.gov. To learn more about victims’ rights, please visit www.justice.gov/criminal-vns/victim-rights-derechos-de-las-v-ctimas.

An indictment and information are merely allegations. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Financial Fraud
Securities, Commodities, & Investment Fraud
Press Release Number: 
Updated April 24, 2023