Court mandates disbursement of $20 million in Crowd Machine 2018 ICO lawsuit

A California court has ruled that Crowd Machine and Metavine, the creators of Crowd Machine Compute Tokens (CMCT), must pay over $20 million in disgorgement, interest, and penalties in a case initiated over two years ago. Craig Sproule, the founder of the companies, was also held liable in the case.

Troubles for Sproule commenced in January 2022 when the United States Securities and Exchange Commission (SEC) filed a lawsuit, alleging that the 2018 initial coin offering (ICO) for CMCT was an “unregistered and fraudulent” securities sale. Apart from the accusation of unregistered securities sales, it was claimed that Sproule misused and lost $5.8 million out of the $33 million raised.

CMCT was intended to compensate computer owners for utilizing their computing power and remunerate programmers for coding. However, the tokens never became operational.

Sproule was fined $195,047 and instructed to shut down CMCT, removing it from the sole cryptocurrency exchange where it was listed. The defendants neither admitted nor denied any wrongdoing.

Subsequently, on Jan. 17, the District Court of Northern California issued a revised final judgment, mandating the defendants to disgorge $19,676,401.27, along with $3.4 million in prejudgment interest. Additionally, Metavine was found liable for disgorgement of $5 million. The Court also ordered the defendants to pay civil penalties of $600,000 each. The SEC highlighted in a statement on Jan. 24:

“The prior consent judgments fully resolved the SEC’s action against Mr. Sproule but left the Court to determine the monetary relief to be paid by the remaining defendants.”

Initial Coin Offerings (ICOs) were a prevalent method for launching cryptocurrencies until the SEC declared them as securities sales in July 2017. Since then, the SEC has pursued numerous cases against ICO issuers.

Sproule founded Metavine in 2013 and Crowd Machine in 2018. Metavine, described as a “no-code [software] development platform,” reportedly filed for bankruptcy on Jan. 3. On the other hand, Crowd Machine is a “unified cloud platform.”

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