Sunday, July 14, 2024
Blockchain

California Court Fines Crowd Machine and Metavine in ICO Case

A California court has recently ruled against Crowd Machine and Metavine, ordering them to pay over $20 million in disgorgement, interest, and penalties. This landmark decision follows the 2018 initial coin offering (ICO) of Crowd Machine Compute Tokens (CMCT), which the U.S. Securities and Exchange Commission (SEC) labeled as fraudulent and unregistered.

The case originated in January 2022 when the SEC filed suit against Crowd Machine’s founder Craig Sproule. Allegations included misuse of $5.8 million from the $33 million raised during the ICO. The CMCT was intended as a digital currency that compensated computer owners for their computing power and paid programmers for writing code. However, these tokens never became operational.

In a recent development, the District Court of Northern California issued an amended final judgment. It ordered the defendants to disgorge $19,676,401.27, pay $3.4 million in prejudgment interest, and imposed civil penalties of $600,000 each. Additionally, Metavine was held liable for disgorgement of $5 million of the total amount. Despite these rulings, the defendants neither admitted nor denied any wrongdoing.

The significance of this case lies in its broader implications for the cryptocurrency industry. ICOs were a popular method for launching cryptocurrencies until the SEC, in July 2017, classified them as securities sales. Since then, the regulatory body has actively pursued cases against ICO issuers for violations.

Crowd Machine and Metavine’s saga serves as a cautionary tale for blockchain startups considering token sales. The hefty fines and legal proceedings highlight the necessity of compliance with securities laws. This case also underscores the SEC’s ongoing efforts to regulate the crypto industry, ensuring investor protection and market integrity.

Image source: Shutterstock

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