Blog: SEC charges Australian man, two associated companies with defrauding investors – Financial Regulation News – Financial Regulation News

The U.S. Securities and Exchange Commission (SEC) detailed last week charges against an Australian man and two companies he founded, alleging actions resulting in defrauding investors.

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Per the SEC complaint, charges were levied against Craig Sproule, Crowd Machine, Inc., and Metavine, Inc. for allegedly making materially false and misleading statements in connection with an unregistered offer and sale of digital asset securities.

The SEC indicated Sproule claimed to have raised $40.7 million through his companies in an initial coin offering (ICO) of Crowd Machine Compute Tokens (CMCTs), telling investors the ICO proceeds would be used to develop a new technology enabling Metavine, Inc.’s existing application-development software to operate on a decentralized network of users’ computers.

The SEC complaint alleged Crowd Machine and Sproule instead began diverting over $5.8 million in ICO proceeds to gold mining entities in South Africa in use never disclosed to investors.

Per the SEC, Crowd Machine and Sproule also did not register offers and sales of CMCT tokens with the agency and knowingly sold CMCTs to groups of investors, including individuals domestically, without determining whether the underlying investors were accredited.

“As alleged, Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said.

The SEC charged Sproule and Crowd Machine with violating the anti-fraud and registration provisions of the federal securities laws; Sproule has been prohibited from serving as an officer or director of a public company and ordered to pay a $195,047 civil penalty; and without admitting or denying the allegations, defendant Metavine Pty. Ltd., has consented to a judgment ordering it to pay disgorgement as court-ordered, against Crowd Machine, up to the amount received, plus prejudgment interest.

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