SEC Charges Crypto Firm Crowd Machine Founder With ‘Fraud and Unregistered’ ICO Offering
According to the Securities and Exchange Commission [SEC], Craig Sproule, the founder of Crowd Machine, defrauded investors out of their money, reports Yahoo Finance. The SEC has charged Australian citizen Craig Sproule along with two other startups he founded, Crowd Machine Inc and Metavine Inc for violating the rules of SEC.
According to the SEC’s case, several elements of the federal securities lawsuit were allegedly violated by Sproule and Crowd Machine, filed in the United States District Court for the Northern District of California. Sproule and Crowd Machine deny the allegations.
Diversion of $5.8 Million Funds
Sproule and Crowd Machine are accused of diverting more than $5.8 million in funds from the ICO to invest in gold mining firms in South Africa, which was not disclosed to investors, claims the Securities and Exchange Commission (SEC).
Crowd Machine and Sproule are accused of failing to properly register their offers and sales of CMCT tokens with the Securities and Exchange Commission, as well as knowingly selling the tokens to groups of investors, including individuals in the United States, without first determining whether or not the tokens were qualified for purchase. The Yahoo Finance report adds, this amounts to “materially false and misleading claims in conjunction with an unregistered offer and sale of digital asset securities.”
Sproule and Crowd Machine allegedly misled investors about how they were using ICO profits, ultimately spending cash on an entirely unrelated scheme, according to Kristina Littman, Chief of SEC Enforcement Division’s Cyber Unit, in a statement. Our goal is to hold digital asset securities issuers responsible for failing to provide the public with complete and truthful disclosure. “We will keep holding issuers of digital asset securities accountable.”
The SEC alleges, Sproule has dubbed himself the “Man behind the Machine” and claims to have raised $40.7 million through his companies, which are collectively referred to as “Crowd Machine,” in an initial coin offering of Crowd Machine Compute Tokens between January and April 2018, according to the SEC.
Initially, the SEC claims that Sproule promised investors that the proceeds from the ICO would be used to develop new technology that would allow Metavine’s existing application-development tools to run on a decentralized network of users’ computers. Sproule is ordered to pay a civil penalty of $195,047 as a result of the allegation.
Sproule and Crowd Machine have consented to orders permanently enjoining them from violating these laws and prohibiting them from participating in future securities offerings without admitting or denying the allegations. They also agreed to work together to have CMCT tokens removed from crypto trading platforms.