US authorities have charged an Australian entrepreneur over an alleged crypto scam that saw nearly $6 million of investors’ money plowed into South African gold mining companies without telling them.
As reported by Australian Financial Review (AFR), California-based Craig Sproule pitched Crowd Machine as a blockchain-based alternative to Amazon Web Services.
Sproule claimed he raised $41 million in early 2018 through an initial coin offering for his company’s crypto, Crowd Machine Compute Tokens (CMCT).
He also dubbed himself “the man behind the Machine” and promised to use the funds to build a decentralized cloud network.
However, the SEC alleges Sproule instead siphoned $5.8 million to gold mining companies in South Africa.
Sproule told investors that CMCT’s price could eventually reach $600. The token never traded higher than $0.085, according to CoinGecko.
The team blamed CMCT’s poor returns on a hack in September 2018 that supposedly saw more than 1 billion tokens stolen. CMCT’s price collapsed 90% shortly after.
But this was just one lie Sproule allegedly told unwitting investors.
Documents lodged by the SEC claim Sproule targeted his marks through social media. He apparently told Crowd Machine had a “live commercial product,” “battle-tested” by Fortune 500 firms.
But the SEC disagreed, saying that none of Crowd Machine’s tech was functional. Indeed, the only thing tested was software used by another Sproule company, Metavine.
Crowd Machine scam still trades on one crypto exchange
The SEC has charged Sproule, Crowd Machine, and Metavine with “making materially false and misleading statements when selling digital asset securities.”
Regulators say Crowd Machine didn’t register its token sale with the Commission. It also “knowingly sold CMCTs to ICO pools without determining whether the underlying investors were accredited.”
As a result, Sproule must cough up $200,000 and can no longer serve as a company director. Crowd Machine’s token will also be pulled from crypto exchanges (at press time, HitBTC is the only platform that still trades CMCT).
According to an SEC statement, none of the South African gold mines that Sproule invested in have returned any revenue. Not only that, all of the $5.8 million is still missing.
“Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme,” said SEC chief cyber unit enforcer Kristina Littman (via AFR, our emphasis).
“We will continue to hold accountable issuers of digital asset securities who fail to provide fulsome and truthful disclosure to the public.”
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