The US Securities and Exchange Commission (SEC) announced in a Thursday press release that it has indicted two cryptocurrency startups and their founder for the unregistered and fraudulent sale of securities by Initial Coin Offering.
SEC has filed charges against Australian citizen Craig Sproule and two companies he founded, Crowd Machine, and Metavine. The regulator has also alleged that part of the proceeds earned from ICO was used to invest in gold mining entities in South Africa, something that wasn’t revealed to investors beforehand.
From January 2018 to April 2018, Craig Sproule sold tokens called Crowd Machine Compute Tokens (CMCT) unregistered, raising $40.7 million from his two firms in the ICO. At the time, Sproule told investors that the earnings would be used to develop a decentralized cloud computer for his project Metavine.
Apart from investing $5.8 million of the ICO funds in South African gold mines without informing the investors, the SEC also alleged that its CMCT tokens were not registered for offers and sale with the commission.
Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit, said in the press release:
“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.”
The complaint was filed in the Federal District Court of Northern California, and Sproule was ordered to pay $195,047 as a civil penalty. The defendant has also agreed to a ruling that bans them from future participation in securities offerings. Sproule is also required to delist CMCT tokens from crypto exchanges.