A California court has recently ordered Crowd Machine and Metavine, the entities behind Crowd Machine Compute Tokens (CMCT), to pay over $20 million in total for disgorgement, interest, and penalties.
This decision comes after a legal battle that started more than two years ago. Additionally, Craig Sproule, the founder of these companies, was also held accountable in this case.
The legal issues for Sproule began in January 2022 when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against him. The SEC’s suit centered around the 2018 initial coin offering (ICO) of CMCT, labeling it as a “fraudulent and unregistered” sale of securities. The lawsuit also accused Sproule of misappropriating and losing $5.8 million from the $33 million raised through the ICO.
CMCT was intended to compensate individuals for utilizing their computing power and to remunerate programmers for their coding efforts. However, the tokens never became functional. Sproule faced a fine of $195,047 and was instructed to cease CMCT operations and delist it from the cryptocurrency exchange where it was listed. The defendants neither admitted nor denied the allegations made against them.
On January 17, the District Court of Northern California issued an amended final judgment. The court mandated the defendants to disgorge $19,676,401.27, along with $3.4 million in prejudgment interest. Furthermore, Metavine was ordered to contribute $5 million towards the total disgorgement amount. Each defendant was also required to pay civil penalties amounting to $600,000. The SEC, in a statement on January 24, clarified that the prior consent judgments resolved the SEC’s action against Mr. Sproule but left the determination of monetary relief against the other defendants to the court.
ICOs were a popular method for launching cryptocurrencies until the SEC in July 2017 classified them as securities sales, leading to numerous legal actions against ICO issuers. Sproule established Metavine in 2013 and Crowd Machine in 2018. Metavine is known as a “no-code” software development platform, while Crowd Machine is described as a “unified cloud platform.” Notably, Metavine filed for bankruptcy on January 3.
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