Two executives from Hydrogen Technology were sentenced this week for their roles in a sophisticated scheme involving cryptocurrency securities fraud.

This case marks the first instance where a cryptocurrency was officially recognized as a security by a federal jury. It might set a legal precedent for how securities laws apply to digital assets, providing a clearer framework for both entrepreneurs and investors.

Hydrogen Technology Executives Will Face Prison Time

Shane Hampton, 32, from Philadelphia, received a sentence of two years and 11 months. While his co-conspirator, Michael Kane, 39, from Miami Beach, was sentenced to three years and nine months.

According to the US Department of Justice, the duo, along with other co-conspirators, used sophisticated methods to manipulate the market price of their company’s cryptocurrency, HYDRO. Their tactics included the employment of a trading bot, which generated fake orders on a major US cryptocurrency exchange, thereby inflating the HYDRO price artificially.

Read more: Crypto Scam Projects: How To Spot Fake Tokens

From October 2018 to April 2019, Kane, the CEO of Hydrogen Technology, and Hampton, the Head of Financial Engineering, executed manipulative strategies. These included approximately $7 million in “wash trades” and over $300 million in “spoof trades.”

These deceptive maneuvers successfully misled investors into buying the HYDRO token. Consequently, the conspirators made around $2 million in illicit profits over just 10 months.

Principal Deputy Assistant Attorney General Nicole M. Argentieri emphasized the severity of this case.

“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,” Argentieri said.

This case is part of a broader crackdown by US authorities on illicit cryptocurrency practices. In April, another significant sentencing occurred involving Irina Dilkinska, former legal chief of OneCoin. She faced a four-year prison term for her role in a massive pyramid scheme that exploited millions.

Moreover, Changpeng Zhao, the former CEO of Binance, also faced legal consequences this year. On June 1, he began serving a four-month prison term at the Federal Correctional Institution in Lompoc, California. Last year, Zhao pleaded guilty to failing to implement an adequate anti-money laundering program at Binance.

Read more: Who Is Changpeng Zhao? A Deep Dive Into the Ex-CEO of Binance

These developments signal increasing scrutiny and regulation of the cryptocurrency industry by US law enforcement, which aims to safeguard investors and maintain market integrity.