The U.S. Securities and Exchange Commission (SEC) has charged the Australian entrepreneur Craig Sproule and his two crypto companies — Crowd Machine Inc. and Metavine Inc. — with defrauding investors.

In a Thursday statement, the SEC said that Sproule and Crowd Machine used more than $5.8 million in proceeds from an initial coin offering (ICO) offered between Jan. and Apr. 2018. The watchdogs alleged Sproule and his company of using the money to invest in gold mining entities in South Africa without disclosing the investment to investors.

The SEC added that Sproule promised investors to use the proceeds to develop a new technology that would help in the development of Metavine’s software to run a decentralized network of users’ own computers. He claimed to have raised $40.7 million through his companies in the ICO, according to the SEC.

The U.S. watchdogs also alleged Crowd Machine and Sproule of not registering their offerings and sales of Crowd Machine Compute Tokens (CMCT) properly. Additionally, Sproule sold the tokens to investors without validating the accreditation of the tokens. 

The complaint filed in the U.S. District Court for the Northern District of California ordered Sproule to pay a $195,047 civil penalty. Without admitting or denying the allegations, Sproule and Crowd Machine have consented to judgments permanently banning them from participating in future securities offerings. They also agreed to seek the removal of CMCT tokens from crypto trading platforms.

Disgorgement, prejudgment interest, and civil penalties for Crowd Machine will be determined by the court at a later date, as will disgorgement and prejudgment interest for Metavine.

“As alleged, Sproule and Crowd Machine misled investors about how they were using ICO proceeds, spending funds on an entirely unrelated scheme,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in the statement.

“We will continue to hold accountable issuers of digital asset securities who fail to provide fulsome and truthful disclosure to the public,” she added.