U.S. Securities and Exchange Commission v. Crowd Machine, Inc. et al

Filing 12

JUDGMENT Pursuant to 5 Stipulation. Signed by Judge Haywood S. Gilliam, Jr. on 1/11/2022. ***Civil Case Terminated.***(ndr, COURT STAFF) (Filed on 1/11/2022)

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1 2 3 4 5 Adam B. Gottlieb (NY Bar. No. 4399135) gottlieba@sec.gov (202) 551-8299 Attorney for Plaintiff U.S. SECURITIES AND EXCHANGE COMMISSION 100 F Street, NE Washington, DC 20549 Facsimile: (301) 847-4705 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 OAKLAND DIVISION 9 10 11 U.S. SECURITIES AND EXCHANGE COMMISSION, Plaintiff, 12 v. 13 FINAL JUDGMENT AS TO CRAIG SPROULE 14 15 CROWD MACHINE, INC., METAVINE, INC., AND CRAIG SPROULE, 16 17 18 19 Defendants, and METAVINE PTY. LTD., Relief Defendant. 20 21 CASE NO. 4:22-cv-00076-HSG . 22 23 24 The Securities and Exchange Commission having filed a Complaint and Defendant Craig 25 Sproule (“Defendant”) having entered a general appearance; consented to the Court’s jurisdiction 26 over Defendant and the subject matter of this action; consented to entry of this Final Judgment 27 without admitting or denying the allegations of the Complaint (except as to jurisdiction and SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule 1 except as otherwise provided herein in paragraph IX); waived findings of fact and conclusions of 2 law; and waived any right to appeal from this Final Judgment: I. 3 4 IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is 5 permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the 6 Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. § 78j(b), and Rule 10b-5 7 thereunder, 17 C.F.R. § 240.10b-5, by using any means or instrumentality of interstate 8 commerce, or of the mails, or of any facility of any national securities exchange, in connection 9 with the purchase or sale of any security: 10 (a) to employ any device, scheme, or artifice to defraud; 11 (b) to make any untrue statement of a material fact or to omit to state a material fact 12 necessary in order to make the statements made, in the light of the circumstances 13 under which they were made, not misleading; or 14 15 16 (c) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 17 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 18 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 19 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 20 participation with Defendant or with anyone described in (a) II. 21 22 IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant 23 is permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 24 (“Securities Act”) [15 U.S.C. § 77q(a)] in the offer or sale of any security by the use of any 25 means or instruments of transportation or communication in interstate commerce or by use of the 26 mails, directly or indirectly: 27 (a) to employ any device, scheme, or artifice to defraud; - 2 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule   1 (b) to obtain money or property by means of any untrue statement of a material fact or 2 any omission of a material fact necessary in order to make the statements made, in 3 light of the circumstances under which they were made, not misleading; or 4 5 6 (c) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 7 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 8 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 9 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 10 11 participation with Defendant or with anyone described in (a). III. 12 IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant 13 is permanently restrained and enjoined from violating Section 5 of the Securities Act [15 U.S.C. 14 § 77e] by, directly or indirectly, in the absence of any applicable exemption: 15 (a) Unless a registration statement is in effect as to a security, making use of any means 16 or instruments of transportation or communication in interstate commerce or of the 17 mails to sell such security through the use or medium of any prospectus or otherwise; 18 (b) Unless a registration statement is in effect as to a security, carrying or causing to be 19 carried through the mails or in interstate commerce, by any means or instruments of 20 transportation, any such security for the purpose of sale or for delivery after sale; or 21 (c) Making use of any means or instruments of transportation or communication in 22 interstate commerce or of the mails to offer to sell or offer to buy through the use or 23 medium of any prospectus or otherwise any security, unless a registration statement 24 has been filed with the Commission as to such security, or while the registration 25 statement is the subject of a refusal order or stop order or (prior to the effective date 26 of the registration statement) any public proceeding or examination under Section 8 27 of the Securities Act [15 U.S.C. § 77h]. - 3 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule 1 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 2 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 3 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 4 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 5 participation with Defendant or with anyone described in (a). IV. 6 7 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that pursuant to Section 8 21(d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)], Defendant is permanently restrained and 9 enjoined from participating, directly or indirectly, including, but not limited to, through any 10 entity controlled by him, in any offering of securities, including any digital asset security; 11 provided, however, that such injunction shall not prevent Defendant from purchasing or selling 12 securities, including digital asset securities, for his own personal account. 13 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, as provided in 14 Federal Rule of Civil Procedure 65(d)(2), the foregoing paragraph also binds the following who 15 receive actual notice of this Final Judgment by personal service or otherwise: (a) Defendant’s 16 officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or 17 participation with Defendant or with anyone described in (a) V. 18 19 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, pursuant to Section 20 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)] and Section 20(e) of the Securities Act [15 21 U.S.C. § 77t(e)]], Defendant is prohibited from acting as an officer or director of any issuer that 22 has a class of securities registered pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] 23 or that is required to file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. 24 § 78o(d)] 25 26 27 VI. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant shall pay a civil penalty in the amount of $195,047 to the Securities and Exchange Commission pursuant to - 4 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule 1 Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], and Section 21(d)(3) of the Exchange 2 Act [15 U.S.C. § 78u(d)(3)]. Defendant shall satisfy this obligation by paying $195,047 to the 3 Securities and Exchange Commission pursuant to the terms of the payment schedule set forth in 4 paragraph VII below after entry of this Final Judgment. 5 Defendant may transmit payment electronically to the Commission, which will provide 6 detailed ACH transfer/Fedwire instructions upon request. Payment may also be made directly 7 from a bank account via Pay.gov through the SEC website at 8 http://www.sec.gov/about/offices/ofm.htm. Defendant may also pay by certified check, bank 9 cashier’s check, or United States postal money order payable to the Securities and Exchange 10 11 12 13 Commission, which shall be delivered or mailed to: Enterprise Services Center Accounts Receivable Branch 6500th MacArthur Boulevard Oklahoma City, OK 73169 14 and shall be accompanied by a letter identifying the case title, civil action number, and name of 15 this Court; Craig Sproule as a Defendant in this action; and specifying that payment is made 16 pursuant to this Final Judgment. 17 Defendant shall simultaneously transmit photocopies of evidence of payment and case 18 identifying information to the Commission’s counsel in this action. By making this payment, 19 Defendant relinquishes all legal and equitable right, title, and interest in such funds and no part 20 of the funds shall be returned to Defendant. 21 The Commission may enforce the Court’s judgment for penalties by the use of all 22 collection procedures authorized by law, including the Federal Debt Collection Procedures Act, 23 28 U.S.C. § 3001 et seq., and moving for civil contempt for the violation of any Court orders 24 issued in this action. Defendant shall pay post-judgment interest on any amounts due after 30 25 days of the entry of this Final Judgment pursuant to 28 U.S.C. § 1961. The Commission shall 26 hold the funds, together with any interest and income earned thereon (collectively, the “Fund”), 27 pending further order of the Court. - 5 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule 1 The Commission may propose a plan to distribute the Fund subject to the Court’s 2 approval. Such a plan may provide that the Fund shall be distributed pursuant to the Fair Fund 3 provisions of Section 308(a) of the Sarbanes-Oxley Act of 2002. The Court shall retain 4 jurisdiction over the administration of any distribution of the Fund and the Fund may only be 5 disbursed pursuant to an Order of the Court. 6 Regardless of whether any such Fair Fund distribution is made, amounts ordered to be 7 paid as civil penalties pursuant to this Final Judgment shall be treated as penalties paid to the 8 government for all purposes, including all tax purposes. To preserve the deterrent effect of the 9 civil penalty, Defendant shall not, after offset or reduction of any award of compensatory 10 damages in any Related Investor Action based on Defendant’s payment of disgorgement in this 11 action, argue that he is entitled to, nor shall he further benefit by, offset or reduction of such 12 compensatory damages award by the amount of any part of Defendant’s payment of a civil 13 penalty in this action (“Penalty Offset”). If the court in any Related Investor Action grants such 14 a Penalty Offset, Defendant shall, within 30 days after entry of a final order granting the Penalty 15 Offset, notify the Commission’s counsel in this action and pay the amount of the Penalty Offset 16 to the United States Treasury or to a Fair Fund, as the Commission directs. Such a payment shall 17 not be deemed an additional civil penalty and shall not be deemed to change the amount of the 18 civil penalty imposed in this Final Judgment. For purposes of this paragraph, a “Related Investor 19 Action” means a private damages action brought against Defendant by or on behalf of one or 20 more investors based on substantially the same facts as alleged in the Complaint in this action. 21 VII. 22 Defendant shall pay the penalty due of $195,047 in five (5) installments to the 23 Commission according to the following schedule: (1) $100,000 within 30 days of entry of this 24 Final Judgment; (2) $23,761.75 within 90 days of entry of this Final Judgment; (3) $23,761.75 25 within 180 days of entry of this Final Judgment; (4) $23,761.75 within 270 days of entry of this 26 Final Judgment; (5) and $23,761.75 within 360 days of entry of this Final Judgment. Payments 27 shall be deemed made on the date they are received by the Commission and shall be applied first - 6 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule   1 to post-judgment interest, which accrues pursuant to 28 U.S.C. § 1961 on any unpaid amounts 2 due after 30 days of the entry of Final Judgment. Prior to making the final payment set forth 3 herein, Defendant shall contact the staff of the Commission for the amount due for the final 4 payment. 5 If Defendant fails to make any payment by the date agreed and/or in the amount agreed 6 according to the schedule set forth above, all outstanding payments under this Final Judgment, 7 including post-judgment interest, minus any payments made, shall become due and payable 8 immediately at the discretion of the staff of the Commission without further application to the 9 Court. VIII. 10 11 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant’s Consent 12 is incorporated herein with the same force and effect as if fully set forth herein, and that 13 Defendant shall comply with all of the undertakings and agreements set forth therein, including, 14 but not limited to, the undertakings to: 15 (a) Cooperate with and not object to Crowd Machine, Inc., and Metavine, Inc. 16 permanently disabling any Crowd Machine Compute Tokens (CMCT) owned or 17 beneficially owned by him or held in his name; and 18 (b) Certify, in writing, compliance with the undertakings set forth above. The 19 certification shall identify the undertakings, provide written evidence of compliance 20 in the form of a narrative, and be supported by exhibits sufficient to demonstrate 21 compliance. The Commission staff may make reasonable requests for further 22 evidence of compliance, and Defendant agrees to provide such evidence. Defendant 23 shall submit the certification and supporting material to Paul Kim, Assistant Director, 24 Division of Enforcement, with a copy to the Office of Chief Counsel of the Division 25 of Enforcement, no later than sixty (60) days from the date of the completion of the 26 undertakings. 27 - 7 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule 1 2 IX. IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that, solely for purposes 3 of exceptions to discharge set forth in Section 523 of the Bankruptcy Code, 11 U.S.C. § 523, the 4 allegations in the Complaint are true and admitted by Defendant, and further, any debt for 5 disgorgement, prejudgment interest, civil penalty or other amounts due by Defendant under this 6 Final Judgment or any other judgment, order, consent order, decree or settlement agreement 7 entered in connection with this proceeding, is a debt for the violation by Defendant of the federal 8 securities laws or any regulation or order issued under such laws, as set forth in Section 9 523(a)(19) of the Bankruptcy Code, 11 U.S.C. § 523(a)(19). X. 10 11 12 IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. XI. 13 14 There being no just reason for delay, pursuant to Rule 54(b) of the Federal Rules of Civil 15 Procedure, the Clerk is ordered to enter this Final Judgment forthwith and without further notice. 16 17 1/11/2022 Dated: _________________________ _________________________________ UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 - 8 - SEC v. Crowd Machine, Inc., et al. Final Judgment as to Craig Sproule

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