By Ann C. Logue
Crypto might receive widespread adoption sooner if some of its biggest promoters would stop running scams. This week, the SEC charged Craig Sproule, an Australian citizen, with making false, material statements in conjunction with an initial coin offering.
Sproule’s had a systems integration firm called Metavine, which was rebranded as Crowd Machine in 2018. In Spring of that year, the company had an Initial Coin Offering through a Cayman Islands entity to raise $40.7 million through a token called the Crowd Machine Crypto Token. The offering was unregistered, and the SEC alleges that no attempt was made to determine if the investors were accredited. The company said that the money raised in the offering would fund a blockchain-based cloud computing service. It is unclear if the company had this technology or spend any money to develop it.
Things got weird almost right away. In September of 2018, the company announced that $14 million of its coins were stolen through a hack. Two people were arrested, but many people suspected that it was an inside job. The SEC says that at least $5.8 million of the ICO proceeds were invested in gold mining operations in South Africa, a use not disclosed to investors.
Sproule was sued by two investors in June of 2021, with the plaintiffs alleging that Sproule made material misstatements in the whitepaper used to explain the technology and sell the offering.
An initial coin offering is a way for a business to raise money while also creating the blockchain needed to run its service. However, the lines between an initial coin offering and an initial public offering of securities are blurry. The unregistered nature of an ICO creates the potential for fraud.
Regulatory agencies have been trying to reign in cryptocurrency almost from Bitcoin’s inception 13 years ago this week. 2022 could be the year when they figure out how to do it. Is that why crypto prices are taking a beating this week?