California Court Orders Crowd Machine and Metavine to Pay Over $20M in CMCT Case

Jimmy Aki
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A California court has ruled that Crowd Machine and Metavine, creators of Crowd Machine Compute Tokens (CMCT), must pay over $20 million in disgorgement, interest, and penalties. This judgment, arising from a case initiated over two years ago, also holds the company’s founder, Craig Sproule, liable for his involvement.

Defendant to Pay $3.35M Pre-Judgement Interest

On January 17, the U.S. States District Court for the Northern District of California issued an updated judgment directing Crowd Machine, its founder Craig Sproule, and Metavine, an affiliate, to face financial consequences in an over two-year CMCT case.

The court directive requires the repayment of $19,676,401.27 coupled with an additional $3.4 million in pre-judgment interest. Furthermore, the court imposed civil penalties amounting to $600,000 for each defendant.

The latest court decision stems from a Securities Exchange Commission (SEC) complaint filed on January 6, 2022, detailing Sproule’s fundraising initiative to develop a global decentralized peer-to-peer network known as the “Crowd Computer.”

This network was purported to run a “no-code” application-development software on users’ devices rather than traditional centralized servers.

The SEC’s complaint alleged that Crowd Machine, Metavine, and Sproule engaged in disseminating false and misleading statements to promote “Crowd Machine Compute Tokens.”

Crowd Machine
Source: Screenshot of SEC v. Crowd Machine, Inc., et al. Court Order

The SEC emphasized that the CMCT tokens were designed for use within the Crowd Machine ecosystem. However, the defendants, without admitting or denying the allegations, previously agreed to judgments that permanently restrained them from violating antifraud and registration provisions.

In addition to the latest disgorgement fee, the court has also mandated Metavine Pty. Ltd. to forfeit $5 million as stipulated by the SEC.

Deep Dive: Sproule Misused $33M and $5.8M Raised From Investors

In addition to facing allegations of engaging in unregistered securities sales, the case involves claims that Sproule misappropriated and lost $5.8 million out of the $33 million he had initially raised from investors.

The SEC lawsuit filed on January 6, 2022, asserted that despite raising at least $33 million, Sproule did not possess “sufficient capital” to sustain CMTC operations.

Furthermore, the financial watchdog disclosed that Sproule, Crowd Machine, and Metavine had agreed to provisions prohibiting them from engaging in further securities offerings. This resulted in the defendants being mandated to disable the CMCT tokens permanently and their availability on digital asset trading platforms.

Additionally, the founder of the company was barred from holding an officer position in a public company and faced a fine of $195,047.

Despite assuring investors that the proceeds from the initial coin offering (ICO) would be utilized to develop a decentralized peer-to-peer network, the SEC’s filing revealed that $5.8 million of ICO funds were directed to a South African mining operation, with no recovery or returns on the investment.

The complaint further outlined how CMCT tokens were intended to be operational in the Crowd Computer ecosystem to compensate device owners for using their computer power and pay software developers to write code.

However, these tokens were never integrated into the operational framework of the ecosystem. The SEC argued that CMCT is an investment contract, classified as a security, and asserted that Crowd Computer and Metavine failed to register their sale with the commission.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.