Month: June 2024

Source: United States Department of Justice Criminal Division

Two men were sentenced for manipulating the price of a security and scheming to defraud investors in connection with the purchase of Hydrogen Technology’s cryptocurrency, HYDRO.

Shane Hampton, 32, of Philadelphia, was sentenced today to two years and 11 months in prison. His co-conspirator, Michael Kane, 39, of Miami Beach, Florida, was sentenced yesterday to three years and nine months in prison.

“Shane Hampton, Michael Kane, and their co-conspirators defrauded investors by using a trading bot to manipulate the price of their company’s cryptocurrency,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “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. This prosecution and the sentences imposed today should serve as a warning:  The Criminal Division will not hesitate to use all tools at its disposal—including the federal securities laws—to protect the integrity of cryptocurrency markets.”

According to court documents and evidence presented at trial, Kane was the co-founder and CEO of Hydrogen Technology, and Hampton was the Head of Financial Engineering at the company. Kane and Hampton hired an outside firm, Moonwalkers Trading Limited of South Africa, to manipulate the price of HYDRO on a cryptocurrency exchange headquartered in the United States by using an automated trading application or “bot” to flood the market with fake and fraudulent orders from October 2018 to April 2019. Kane, Hampton, and their co-conspirators executed approximately $7 million in “wash trades” and placed over $300 million in “spoof trades” for HYDRO through the bot. These manipulative trades were designed to, and did, fraudulently induce retail investors to purchase HYDRO. Through the artificially inflated prices that resulted from their manipulation efforts, Kane, Hampton, and their co-conspirators made approximately $2 million in profits from selling HYDRO over roughly 10 months.

Kane pleaded guilty in November 2023 to one count of conspiracy to commit securities price manipulation, one count of conspiracy to commit wire fraud, and two counts of wire fraud. Hampton was convicted by a federal jury on Feb. 7 of one count of conspiracy to commit securities price manipulation and one count of conspiracy to commit wire fraud. The jury unanimously found that the defendants’ sales of HYDRO constituted investment contracts, making the token a security under federal securities law. Hampton’s case was the first criminal jury trial in which a cryptocurrency was found to be a security.

Two other co-conspirators, Andrew Chorlian and Tyler Ostern, pleaded guilty in May 2023 to one count of conspiracy to commit securities price manipulation and wire fraud, and both were previously sentenced.

The FBI Miami Field Office investigated the case.

Assistant Chief Scott Armstrong and Trial Attorney Andrew Jaco of the Criminal Division’s Fraud Section prosecuted the case.

Source: United States Department of Justice Criminal Division

Alongside state and local law enforcement partners in Cleveland, Attorney General Merrick B. Garland, Director Steven Dettelbach of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), and U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio today announced the opening of a new Northeast Ohio Crime Gun Intelligence Center (CGIC) in Cleveland.

“The Northeast Ohio Crime Gun Intelligence Center will allow us to leverage our partnerships and technological innovation to solve gun crimes and to save lives,” said Attorney General Garland. “When it comes to investigating gun crimes, every day matters. Every day, another lead can run dry. Every day, a repeat shooter may shatter another family and another community. With this CGIC, it does not matter if a crime is committed in a city, a suburb, or a rural area. The law enforcement officers who investigate will have cutting-edge technology at their fingertips and a lineup of experts ready to assist.”

“Following on the success of last year’s intelligence-driven gun crime initiative, this Crime Gun Intelligence Center puts in the same room analysts, agents, cops, deputies, and both federal and state prosecutors,” said ATF Director Dettelbach. “They work together on the same cases using real time, state-of-the-art intelligence. Every morning, they review key evidence from the previous night’s shootings to identify the shooters. CGICs like this make homicide cases. CGICs like this stop the next shooting. And CGICs like this help stop the crime guns that are getting to the shooters. I want to commend the ATF Cleveland leadership and the many law enforcement agencies working together under one roof with a focus on real-time ballistics testing and crime gun tracing. I also want to thank the leadership here for coming together to protect Ohioans. Mayor Bibb, Attorney General Yost, County Executive Ronayne, Mayor Malik, and Governor DeWine have all supported a law enforcement presence in this CGIC. Without all of them, this CGIC does not happen. This level of partnership is truly exceptional. Chalk one up for the good guys in Ohio.”

CGICs are centralized law enforcement hubs that focus exclusively on investigating and preventing gun violence in local communities. They use cutting-edge technologies, including ATF’s National Integrated Ballistic Information Network (NIBIN) and eTrace systems, to rapidly develop and pursue investigative leads in order to drive case clearance rates up — which in turn can help drive violent crime rates down. They bring together, under one roof, the expertise of firearm evidence examiners, intelligence analysts, and investigators to rapidly collect, analyze, and share information about guns used in violent crimes. In total, ATF operates more than 60 CGICs nationwide.

“Prosecuting and preventing violent crime throughout our district is one core mission of the United States Attorney’s Office. And investigative data shows that the same guns are often used to commit multiple, different instances of violent crimes, without regard to city or county lines,” said U.S. Attorney Lutzko. “That is why we most effectively combat violent crime — and the illegal firearms trafficking that supports it — through strong regional partnerships, collaboration, and technology. The incredible capabilities of the Crime Gun Intelligence Center — and the federal, state, and local partnerships that make it possible — allow us to connect the dots between crimes so we can prosecute, convict, and lock up the bad actors who commit violent crimes and remove “crime guns” from the streets faster, so neither continue to endanger innocent people in neighborhoods throughout Northern Ohio.”

“ATF has long worked with our partners in the Cleveland area to reduce violent crime, including the use of NIBIN and other intelligence tools,” stated Daryl McCormick, Special Agent in Charge of ATF’s Columbus Field Division. “This CGIC represents both a broadening and deepening of that cooperation and commitment. We are broadening this intelligence approach to a regional level, recognizing that those perpetrating violence don’t respect civic boundaries. In addition, we are all committing to the timely and comprehensive entry of information, and the analysis and use of these intelligence tools, to ensure that every CGIC participating agency has the information that may provide investigative leads as quickly as possible. I firmly believe that this effort will help us identify, investigate, and prosecute those individuals who are harming our communities.”

The Northeast Ohio CGIC is the first CGIC located within an Organized Crime Drug Enforcement Task Force (OCDETF) Strike Force, which not only supports the use of Crime Gun Intelligence (GCI) but also applies proactive investigative work and incorporates the use of OCDETF funds and resources. The CGIC was designed to execute a two-pronged approach: an intelligence component, led by ATF, and an investigative component, led by Ohio High Intensity Drug Trafficking Areas program (HIDTA).

Over 30 agencies across federal, state, and local law enforcement are partners in this new CGIC, focusing on real-time comprehensive ballistics testing and firearms tracing, two of ATF’s fundamental pillars of Crime Gun Intelligence. Federal and state prosecutors are included as participants to ensure the charging process is timely and effective. The Northeast Ohio CGIC partners include ATF, the U.S. Attorney’s Office for the Northern District of Ohio, Cleveland Division of Police, Cuyahoga County Prosecutor’s Office, Cuyahoga County Sherrif’s Office, Ohio HIDTA, Ohio Narcotics Intelligence Center, Ohio Breau of Criminal Investigation, Northeast Ohio Regional Fusion Center, Garfield Heights Police Department, Lakewood Police Department, Lorain Police Department, Ohio State Highway Patrol, Ohio Investigative Unit, and the Ohio Department of Rehabilitation and Correction/Ohio Adult Parole Authority. Six additional agencies support the CGIC but are located with ATF’s Akron and/or Canton Task Forces: Akron Police Department, Barberton Police Department, Canton Police Department, Portage County Sheriff’s Office, Summit County Sheriff’s Office, and the University of Akron Police Department. Nine additional agencies have designated a liaison to support the CGIC: Elyria Police Department, Euclid Police Department, Lake County Sheriff’s Office, Lorain County Sheriff’s Office, Maple Heights Police Department, Medina City Police Department, Medina County Sheriff’s Office, Solon Police Department, and Willoughby Police Department. Additionally, four federal agencies support the CGIC through their participation at the OCEDTF Strike Force: Homeland Security Investigations, Drug Enforcement Administration, FBI, and the U.S. Marshal’s Service.

Source: United States Department of Justice Criminal Division

A Kentucky man pleaded guilty and was sentenced last week to one year and one day in prison and one year of supervised release in the District of Eastern Louisiana for committing a federal hate crime.

According to court documents, Brian Adams, 24, of Paintsville, Kentucky, transmitted a threat to a fifth-grade class at the Laureate Academy Charter School on or about Oct. 14, 2020. At the time, the school was conducting class virtually over Zoom due to the COVID-19 pandemic. Specifically, Adams used racial epithets against the students and teachers and threatened to “hang them by a tree.” Adams pleaded guilty to one count of transmitting threatening communications. The court found that Adams’ actions were motivated by hate.

“This prosecution should make clear that perpetrators of hate crimes hiding behind computer screens, hacking into teleconferences and disrupting virtual meetings will be held accountable. The defendant used racial epithets and threats against innocent children who were simply trying to get an education,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “No child should ever have to endure racially motivated hatred like this in a classroom, a school or anywhere else. The Justice Department is committed to protecting children from such hate-filled assaults and to safeguarding their right to a safe and secure education.”

“Citizens should not fear threats based on their race at any time and especially for students while pursuing their education,” said U.S. Attorney Duane A. Evans for the Eastern District of Louisiana. “The U.S. Attorney’s Office is committed to working closely with federal, state and local law enforcement to ensure hate crimes are investigated, prosecuted and to ultimately hold perpetrators responsible for their actions.”

“Hate has no place in our country, especially in a fifth-grade classroom,” said Special Agent in Charge Lyonel Myrthil of the FBI New Orleans Field Office. “Protecting the rights of all Americans under the Constitution is the heart of the FBI’s mission.”

The FBI New Orleans Field Office investigated the case.

Assistant U.S. Attorney Tracey N. Knight for the Eastern District of Louisiana prosecuted the case, with assistance from Trial Attorney Mary Hahn of the Civil Rights Division’s Criminal Section.