The SEC has filed charges against Hydrogen Technology Corporation and former chief executive Michael Ross Kane for alleged sales of unregistered “crypto asset securities” in the form of Hydro tokens.
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- Moonwalkers Trading Limited CEO, Tyler Ostern, is also being charged for allegedly manipulating markets to help Hydrogen sell the tokens for US$2.2 million in profits.
- In 2018, Hydrogen minted over 11 billion Hydro tokens for fundraising purposes and distributed them as airdrops, bounties, and employee compensation.
- Airdrops and bounties are promotional token distribution methods that aim to incentivize early adopters with free tokens.
- Hydrogen reportedly began selling tokens once Hydro was listed on trading platforms “including two popular, high-volume platforms, one of which is based in the United States,” according to the SEC.
- “You don’t even get to the Howey test until you determine there was an offer or sale. How is a free airdrop an offer or sale?” securities law professor at George Mason University J.W. Verret asked on Twitter.
- The SEC is currently involved in several high-profile crypto cases including Ripple and LBRY.
See related article: SEC, Ripple seek summary judgment in attempt to speed up XRP lawsuit