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SEC Charges Founder of Crypto Startup Crowd Machine With Fraud – CoinDesk

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The U.S. Securities and Exchange Commission (SEC) has charged Craig Sproule of Australia – along with two crypto companies he founded, Crowd Machine Inc. and Metavine Inc. – with defrauding investors.
The SEC said in a statement Thursday that Sproule and Crowd Machine used over $5.8 million in proceeds from an initial coin offering offered between January and April 2018 to invest in gold mining entities in South Africa, which wasn’t disclosed to investors.
The SEC says Sproule initially told investors that proceeds would be used to develop a new technology that would enable Metavine’s existing application-development software to run on a decentralized network of users’ own computers. Sproule claimed to have raised $40.7 million through his companies in the ICO, according to the SEC.
The SEC also alleged that Crowd Machine and Sproule didn’t properly register their offerings and sales of Crowd Machine Compute Tokens (CMCT), and sold the tokens to groups of investors without determining whether the tokens were accredited.
The complaint filed in the U.S. District Court for the Northern District of California ordered Sproule to pay a $195,047 civil penalty. Without admitting or denying the allegations, Sproule and Crowd Machine have consented to judgments permanently banning them from participating in future securities offerings. They also agreed to seek the removal of CMCT tokens from crypto trading platforms.
Disgorgement, prejudgment interest and civil penalties for Crowd Machine will be determined by the court at a later date, as will disgorgement and prejudgment interest for Metavine.
“As alleged, Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in the statement.
“We will continue to hold accountable issuers of digital asset securities who fail to provide fulsome and truthful disclosure to the public,” she added.
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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
Michael Bellusci
Michael Bellusci is CoinDesk's crypto payments reporter.
Follow @mikeybellusci on Twitter
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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.
@2021 CoinDesk

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