A California court has rendered a verdict requiring Crowd Machine and Metavine, the entities behind Crowd Machine Compute Tokens (CMCT), to pay over $20 million in disgorgement, interest, and penalties. This legal battle began more than two years ago, with the founder, Craig Sproule, also found liable in the case. The troubles for Sproule started in January 2022 when the U.S. Securities and Exchange Commission (SEC) filed a lawsuit, alleging that the 2018 initial coin offering (ICO) for CMCT constituted a "fraudulent and unregistered" securities sale. Sproule faced charges of conducting unregistered securities sales and misusing and losing a significant portion of the raised funds.
CMCT tokens were intended to reward computer owners for sharing their computing power and compensate programmers for code creation. However, these tokens were never put into practical use. In the SEC's January 17 statement, it was revealed that the Northern California District Court issued an amended final judgment, instructing the defendants to disgorge $19,676,401.27, along with $3.4 million in prejudgment interest. Metavine, part of the entities held responsible, was accountable for $5 million of the total disgorgement. The court also mandated each defendant to pay a civil penalty of $600,000. The SEC emphasized that the defendants neither admitted nor denied any wrongdoing.
The SEC's legal action against Sproule and the associated entities reflects the regulatory scrutiny on initial coin offerings (ICOs), which were a common method for issuing cryptocurrencies until July 2017. At that time, the SEC determined that ICOs constituted securities sales, leading to multiple lawsuits against ICO issuers. Sproule, who founded Metavine in 2013 and Crowd Machine in 2018, faced legal consequences for the alleged fraudulent and unregistered securities sale through the CMCT ICO. It's noteworthy that Metavine reportedly filed for bankruptcy on January 3, adding a financial dimension to the legal proceedings. Crowd Machine, on the other hand, is described as a "unified cloud platform."
