The US Securities and Exchange Commission (SEC) has charged an Australian citizen who called himself “the man behind the machine” in a crypto fraud scheme that raised nearly $41 million. He and his companies have made “materially false and misleading statements in connection with an unregistered offer and sale of securities for digital assets.”
Shipping “Man Behind the Machine” by SEC
The Securities and Exchange Commission on Thursday announced that Australian citizen Craig Sproul and two companies he founded have been charged with “investor fraud.” The two companies are Crowd Machine Inc. and Metavine Inc.
The Securities and Exchange Commission alleged that it made “materially false and misleading statements in connection with an unregistered offering and sale of securities for digital assets.”
The securities regulator explained that Sproule referred to himself in social media posts as “the man behind the machine.” He claimed to have raised $40.7 million in initial coin offering (ICO) from crowd-compute tokens (CMCTs). The show took place between January and April 2018.
Instead of using the proceeds of the ICO for the purpose it told investors, the Securities and Exchange Commission (SEC) described:
Crowd Machine and Sproule have begun transferring more than $5.8 million in ICO proceeds to South African gold mining entities – a use that has never been disclosed to investors.
The SEC also said that Crowd Machine and Sproule had not registered their offering and sales of CMCT tokens. In addition, they deliberately sold the tokens without specifying whether the investors were accredited or not.
Christina Littmann, Head of the Internet Unit in the Law Enforcement Division of the SEC commented:
Sproule and Crowd Machine misled investors about how they use ICO returns, spending money on a completely unrelated scheme.
The SEC complaint “accuses Sproule and Crowd Machine of violating the anti-fraud and registration provisions of the federal securities laws.”
The two agreed and the defendant in the Metavine Pty relief case. Ltd. , which is an Australian affiliated entity, can handle judgments without acknowledging or denying the allegations.
They are prohibited from participating in future securities offerings. Sproule is also prohibited from “acting as an administrator or director of a public company, and [will be ordered] to pay $195,047 in civil fine.” Moreover, CMCT tokens must be disabled and removed from cryptocurrency exchanges.
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