A Paris criminal court has sentenced a former Holograph Foundation employee to five years in prison for his role in the illegal minting and transfer of 1 billion HLG tokens, valued at approximately $14 million at the time. The defendant, identified as Vitaliy K., will serve two years of the sentence, with the remainder suspended, and must pay a €600,000 fine.
Court findings
The ruling was issued on November 6, 2026, at the Paris tribunal judiciaire. The court found Vitaliy K. guilty of unauthorized access to an automated data processing system, organized fraud, money laundering, and membership in a criminal association.
The illegal activity occurred between May and August 2024, when the minting rules for HLG tokens were modified without authorization. The changes enabled the creation and theft of 1 billion HLG tokens, worth roughly €12.5 million at the time.
Two accomplices were also convicted and received lighter sentences. One was fined €80,000 and given a two-year prison sentence with 14 months suspended. The other received a €40,000 fine and a fully suspended two-year sentence.
Foundation's compensation claim rejected
The Holograph Foundation sought compensation for losses linked to the decline in HLG's price, but the court dismissed the claim. The judges found no direct causal link between the fraudulent acts and the claimed losses, noting that HLG had already suffered a significant price drop before the fraud occurred.
HLG traded at around $0.03 in May 2024 and had fallen to $0.001 by late December 2024.
Background
The Holograph Foundation, incorporated in the Cayman Islands, built cross-chain tools for tokens and NFTs, allowing digital assets to move between different blockchains. In July 2024, Holograph and Halborn published a post-mortem on an exploit involving 1 billion HLG tokens on the Mantle chain, attributing the incident to a disgruntled former contractor. A suspect was arrested in Italy in September 2024.
The foundation has stalled its business operations and is preparing for liquidation.
Implications
The case highlights the risk posed by insiders with legitimate access. While smart contract audits can verify code, they are less effective when someone with authorized access quietly changes the rules. The conviction under conventional French criminal law—covering fraud, money laundering, and unauthorized system access—demonstrates that traditional legal tools can reach crypto insiders without crypto-specific statutes.
The causation ruling may influence future cases, as courts may be reluctant to award damages for price declines when a token was already falling before a crime occurred. Projects seeking to recover losses through civil claims may need clearer evidence linking specific market damage to specific misconduct.
