SEC files suit against founder for 'defrauding investors' during ICO
The United States Securities and Exchange Commission (SEC) has struck against a founder for carrying forward and implementing a fraud sale of tokens via ICO or initial coin offering. The lawsuit has been filed against Australian Craig Derel Sproule.
Fraudulent sale of securities
The SEC has filed a suit against the founder, who is believed to have sold unregistered securities via his company, Metavine Inc., during its ICO for Crowd Machine (CMCT), which lasted from January to April 2018.The SEC pointed out that the self-proclaimed 'Man behind the Machine' "claimed to have raised $40.7 million through his companies, collectively referred to as 'Crowd Machine,' in an initial coin offering of Crowd Machine Compute Tokens (CMCTs)."
SEC pointed out that the founder had actually lied to the investors and never actually implemented the technology that he had promised. The ICO proceeds were to be used to help the "existing application-development software [from Metavine] to run on a decentralized network of users' own computers," which never happened.
SEC believes that the founder diverted the funds
The SEC believes that the founder actually used the proceeds from the ICO in something which wasn't promised to the investors. Sproule has been accused of "diverting more than $5.8 million in ICO proceeds to gold mining entities in South Africa.""As alleged, Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme," said Kristina Littman, Chief of the SEC Enforcement Division's Cyber Unit.Littman also stated that the department "will continue to hold accountable issuers of digital asset securities who fail to provide fulsome and truthful disclosure to the public."
The SEC has charged Sproule and Crowd Machine with violating the "antifraud and registration provisions of the federal securities laws," which is a serious offense. As a result, Sproule is liable to pay $195,047 as a fine and is barred from holding any office in a public company.
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