SEC charges Crowd Machine over allegedly unregistered ICO

The Securities and Exchange Commission has charged an Australian man for allegedly making false claims related to an unregistered initial coin offering (ICO).

The US securities regulator charged Craig Sproule and his two companies, Crowd Machine and Metavine, over an ICO of the firms' Crowd Machine Compute Tokens (CMCTs). The offering occurred from January to April of 2018. 

The SEC claims Sproule publicized that the ICO proceeds would go to new technology development for Metavine, enabling the firm to run its app-development software on a decentralized network. Instead, the SEC claims Sproule and Crowd Machine diverted the $5.8 million to gold mining entities in South Africa without alerting investors.


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Furthermore, the SEC claims that the CMCT sale constituted an unregistered securities offering, and that Sproule and his firms knowingly sold the tokens without determining if the investors were accredited. 

The SEC filed its complaint in the United States District Court for the Northern District of California, charging Sproule and Crowd Machine with violating antifraud and registration provisions in federal securities laws. Metavine is acting as a relief defendant, meaning the firm is considered an innocent party despite being named in the case, but holds funds on behalf of the accused party, in this case CrowdFund. 

The defendants have neither admitted or denied the allegations, but they have consented to judgments that would bar them from future violations or participation in future securities offerings and would require them to permanently disable and seek delisting of the CMCT tokens. Sproule also cannot serve as an officer or director of a public company and must pay a fine of $195,047.

Any disgorgement or civil penalties will be determined by the court in the future. 


About Author

Aislinn Keely is a reporter on The Block's policy team holding down the legal beat. She covers court decisions, bankruptcies, regulatory actions and other key moments in the legal sphere, putting them in context for the wider crypto industry. Before The Block, she lent her voice to the NPR affiliate WFUV and helmed Fordham University's student newspaper. Send tips or thoughts on all things policy and legal to or follow her on Twitter for updates @AislinnKeely.