The Securities and Exchange Commission (SEC) has charged Australian Craig Sproule with fraud. Allegedly, he misled investors about how he was going to use the funds from a $41 million initial coin offering four years ago, CoinDesk reported.
Sproule founded two crypto startups, Crowd Machine Inc. and Metavine Inc.
Sproule diverted funds to South African gold mines
According to a statement made by SEC on Thursday, Sproule and the company Crowd Machine used almost $6 million in proceeds from an ICO between January and April 2018 to invest in gold mining entities in South Africa, which wasn’t revealed to investors.
Sproule apparently told investors that he would use the proceeds to develop a new technology that would let Metavine Inc.’s existing app development software run on users’ own computers in a decentralized network. SEC added that Sproule claimed to have raised $40.7 million through his companies in the initial coin offering.
Offers weren’t registered properly
The SEC has also accused Crowd Machine and Sproule of not registering their offers and sales of Crowd Machine Compute Tokens (CMCT) properly. Allegedly, they sold the tokens to investors without checking the accreditation of the latter.
Civil penalty of just under $200K ordered
According to the complaint, which was filed in the US District Court for the Northern District of California, the perpetrator must pay a $195,047 civil penalty. Sproule and Crowd Machine have consented to judgments permanently banning them from becoming involved in future securities offerings, but they have neither admitted nor denied the charges.
They also consented to a request to remove CMCT tokens from cryptocurrency exchanges. The consents to judgments are subject to court approval.
Metavine Pty. Ltd has also consented to a judgment ordering it to pay, on a joint and several basis with Crowd Machine, such disgorgement as the court orders against Crowd Machine, up to the amount it received, plus prejudgment interest thereon.
The court will determine the civil penalties, interest, and disgorgement allegations for Crowd Machine at a later date. The same applies for disgorgement and prejudgment interest for Metavine Inc. Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement:
As alleged, Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme. We will continue to hold accountable issuers of digital asset securities who fail to provide fulsome and truthful disclosure to the public.
