SEC files lawsuit against operators of 'unregistered' $33M Crowd Machine ICO

Time:2022-01-07 Source: 898 views Trending Copy share

According to the SEC indictment, Crowd Computer's ICO tokens were sold to Americans as "investment contracts," classifying them as securities.

The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Australian Craig Derel Sproule, accusing his company of “fraudulently and unregistered” selling “digital asset securities” in an initial coin offering conducted in 2018.

In its Jan. 6 complaint, the SEC alleges that Sproule's company, Metavine, Inc., ran an ICO for Crowd Machine (CMCT) from January to April 2018, sold unregistered securities, and never got the project to work. operations, and "made material misrepresentations about how it intended to use ICO proceeds."

In total, Sproule has raised at least $33 million, but he now lacks "sufficient capital to continue operations," the SEC said. The reason for his lack of funds is at the heart of the SEC case.

Sproule agreed to terms that bar him, Crowd Machine and Metavine from any further securities offerings, the SEC's Jan. 6 announcement about the case showed. They must also “permanently deactivate the CMCT token and seek to remove it from digital asset exchanges.” According to CoinGecko, CMCT is currently only tradable on HitBTC.

Sproule was banned from being an executive of a public company and ordered to pay a fine of $195,047.

Although Sproule told investors that the ICO's proceeds would be used to fund the development of a decentralized peer-to-peer network, the complaint states that $5.8 million of ICO funds were used for loans or equity in a South African mining company.

So far, none of the funds have been recovered and Sproule has not received any return on investment.

The indictment also details how the CMCT tokens were supposed to function within the Crowd Computer ecosystem to pay device owners for using their computer power and pay software developers to write code. However, these tokens were never put to use in the ecosystem.

The SEC said the CMCTs are investment contracts, classified as securities, and Crowd Computer and Metavine did not register their sales with the commission.

“Many courts have made it clear that the offering and sale of digital assets such as CMCTs are investment contracts and, therefore, such digital assets are “securities” under the federal securities laws.”

The question of whether cryptocurrencies should be classified as securities or commodities has been at the center of debate in some circles. SEC Chairman Gary Gensler urged cryptocurrency companies to “talk” to him about the legal status of cryptocurrencies in securities laws. (Cointelegraph)

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