The US Securities and Exchange Commission has accused the creators of alternatives to “distributed” Amazon Web Services to trick millions of investors. On Friday, the SEC issued a complaint against Craig Sproule, an Australian citizen who is the CEO of cryptocurrency startup CrowdMachine. It promised a global cloud computing network built on the user’s computer. In fact, Sproule is said to have sent $ 5.8 million to a South African gold mine as investors’ cryptocurrency tokens have become worthless.
According to SEC complaints, Sproule has raised at least $ 33 million through an initial coin offering (or ICO) to build a decentralized “Crowd Computer” platform that claims to have been “battle-tested” by Fortune 500 companies. He compared the service to AWS and Microsoft’s Azure and said that the Crowd Machine Compute Tokens (CMCT) are worth $ 10 to $ 600 each. However, complaints say he made false and misleading statements, and the platform has never been built as advertised. Instead, CrowdMachine hosted the system on a central server.
The ICO itself was not registered with the SEC, and Crowd Machine did not verify that investors were certified as required by law. And when Sproule tried to raise money, Crowd Machine allegedly sent $ 5.8 million to a gold mine in South Africa without notifying investors. The transfer was described as a loan or a purchase of equity interests, but the gold mining business “did not return revenue,” complaints report.
Crowd Machine had a problem a few months after it started raising funds. In mid-2018, hackers reported stealing numerous CMCTs. We stopped trading and lowered the price of coins. Two men were subsequently arrested for hacking. Eventually, “CMCT’s secondary market has almost disappeared, with the value that CMCT once held for token holders,” the complaint said. Tokens sold between $ 0.03 and $ 0.22 per token and never traded above $ 0.18 in the secondary market.
Upon receiving the complaint, Sproule agreed to the terms set by the SEC. The agreement does not require him to admit fraud, but it permanently prohibits him from offering securities containing crypto assets. He also has to pay a civil penalty of $ 195,000 and agree to permanently invalidate his CMCT.
