The Securities and Exchange Commission (SEC) obtained a court order against Crowd Machine, Inc. and Metavine, Inc.
The United States District Court for the Northern District of California entered an amended final judgment ordering defendants Crowd Machine, Inc. and Metavine, Inc. to reject $19,676,401.27 raised from investors in an unregistered and fraudulent offering of cryptoasset securities, plus $14.58, plus $1358. interesting. The Court found the liability of the relief defendant and subsidiary Metavine Pty. Ltd., jointly and severally with the defendants, for relief in the amount of $5 million.
The Court also ordered the defendants to pay civil penalties of $600,000 each.
The SEC’s complaint accused defendants Crowd Machine and Metavine and founder Craig Sproule of making materially false and misleading statements in connection with the unregistered offering and sale of crypto-asset securities they referred to as “Crowd Machine Compute Tokens” or “CMCTs.”
Without admitting or denying the SEC’s allegations, the defendants previously consented to the entry of injunctions permanently enjoining them from violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) and of section 10(b) of the Act. The Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and the registration provisions of Sections 5(a) and (c) of the Securities Act.
The consent decrees also enjoined the defendants from participating in future securities offerings, ordered them to permanently deactivate the CMCTs in their possession and seek the removal of the CMCTs from cryptocurrency trading platforms, and as to Sproule, imposed a civil penalty of $195,047 and barred him from serving as an officer or director of a public company. The prior consent decrees 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.
The Court’s final decision followed an order, issued on December 5, 2023, partially accepting the Securities and Exchange Commission’s proposal for monetary relief. Among other rulings, the Court denied the defendants’ request to deduct from their forfeiture “expenses incurred in initiating the illegal and unregistered sale of securities, such as marketing and consulting costs for the onward sale,” “cutting costs” CMCT ” for selling in an unregistered offering that was itself tainted by fraud,” legal fees incurred in “defending the fraud itself after the fact,” post-offer “depreciation of crypto assets obtained by fraud,” and accrued but unpaid expenses, including employee wages.