The United States Securities and Exchange Commission (SEC) has filed a suit against Australian Craig Derel Sproule for the allegedly “fraudulent and unregistered” sale “of digital asset securities” in an Initial Coin Offering his company conducted in 2018.
The SEC alleges in a Jan. 6 complaint that Sproule’s company, Metavine, Inc. which operated the ICO for Crowd Machine (CMCT) from Jan. to April 2018, sold unregistered securities, never made the project operational and “materially misrepresented how it intended to use ICO proceeds.”
Our top trading bots
In total, the SEC says Sproule raised at least $33 million dollars, but that he now lacks “sufficient capital to fund continued operations.” The reason for his lack of funds goes to the core of the SEC’s case.
A Jan. 6 announcement from the SEC regarding the case indicates that Sproule agreed to provisions which prohibit him, Crowd Machine and Metavine from performing any more securities offerings. They must also “permanently disable the CMCT tokens and seek their removal from digital asset trading platforms.” CMCT is currently only available for trade on HitBTC according to CoinGecko.
Sproule is prohibited from becoming an officer of a public company and has been ordered to pay a $195,047 fine.
Although Sproule told investors that ICO proceeds would be used to fund the development of a decentralized peer-to-peer network, the complaint states that $5.8 million of the ICO funds were sent to a South African mining operation as a loan or for equity in the company. So far, none of those funds have been recovered and Sproule has made no returns on the investment.
The complaint also details how CMCT tokens were supposed to be made operational in the Crowd Computer ecosystem to pay device owners for use of their computer power and to pay software developers for writing code. However, the tokens were never made operational in the ecosystem.
The SEC alleges that CMCTs are investment contracts, which are classified as securities, and that Crowd Computer and Metavine failed to register their sale with the commission:
“Numerous courts have found specifically that offers and sales of digital assets like CMCTs are investment contracts, and therefore that such digital assets are “securities” under the federal securities laws.”
Related: SEC chair has a new senior adviser for crypto
The question of whether cryptocurrencies should be classified as securities or commodities has been the center of debate in certain circles for a while. SEC chair Gary Gensler urged crypto companies to “come in and talk” with him about the legal standing of crypto as they pertain to securities laws.
Read on about Cointelegraph
