Regulation
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The US Securities and Exchange Commission accused the Hydrogen platform of illegal distribution of securities, including through the distribution of free tokens
The US Securities and Exchange Commission has classified airdrops (free distribution of tokens) as an illegal way to distribute securities in accusations against Hydrogen Technology Corporation, its former CEO Michael Ross Cain and Moonwalkers CEO Tyler Ostern.
The SEC lawsuit states that in 2018, the now-defunct New York company Hydrogen created the Hydro token, and then publicly distributed it through airdrops, rewards to individuals for promoting the token, rewards to employees, as well as in the form of direct sales on crypto platforms. The Commission alleges that Hydrogen hired the South African firm Moonwalkers after the token distribution to create a false appearance of market activity for the Hydro token using specialized software. As a result of these manipulations, Hydrogen allegedly made a profit of more than $2 million.
“Companies cannot avoid the enforcement of securities laws by arranging unregistered offerings and sales of their securities as rewards, compensation, or other similar methods,” Carolyn M. Welshhans, deputy director of the SEC’s Division of Enforcement, said in a statement.
The SEC has demanded injunctions against the defendants to participate in certain activities, including the distribution of securities. The court also ordered them to pay fines, the full amounts of which have not yet been agreed upon.
Last week, it became known that one of the most high-profile court cases in the crypto industry regarding the issue of recognizing a cryptocurrency as a security (SEC vs. Ripple Labs) could be considered in an expedited manner. Both parties petitioned for this in court.
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