Two former executives of Hydrogen Technology have been sentenced for manipulating the price of the firm’s cryptocurrency and defrauding investors, the U.S. Department of Justice announced on Tuesday. 

Michael Kane, co-founder and former CEO of Hydrogen was sentenced to three years and nine months in prison, while his co-conspirator, Shane Hampton, a former head of financial engineering at the firm, was sentenced to two years and 11 months, according to the DOJ statement.

The DOJ statement, citing court documents, suggested that Kane and Hampton hired an outside firm, Moonwalkers Trading Ltd. of South Africa, to manipulate the price of Hydro tokens on a cryptocurrency exchange in U.S. The group executed about $7 million in wash trades and placed over $300 million in spoof trades for the token through the bot. 

“Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security,” the DOJ said. “The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law.”

Starting 2018, Hydrogen’s platform claimed to let users develop applications and businesses using Hydro protocols on the Ethereum blockchain.

The U.S. Securities and Exchange Commission charged Hydrogen and Kane in September 2022 with market manipulation of crypto asset securities from 2018 to 2019.

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In February of this year, Hampton was convicted of conspiracy to commit securities price manipulation and wire fraud. Earlier, the firm was forced to pay $2.8 million in fines and damages after an enforcement action by the SEC.

Meanwhile, Kane pleaded guilty to securities price manipulation, wire fraud, and additional charges related to these crimes.

“In this case, for the first time, a jury in a federal criminal trial found that a cryptocurrency was a security and that manipulating cryptocurrency prices was securities fraud,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri. 

“Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot to manipulate the price of their company’s cryptocurrency,” Argentieri added.