The U.S. Securities and Exchange Commission (SEC) has charged crypto influencer Ian Balina, alleging the crypto personality did not file a registration statement with the commission for his offering and sale of Sparkster's SPRK tokens, and no exemption from registration was applicable.
He also allegedly failed to disclose the compensation he received while promoting Sparkster’s SPRK initial coin offering (ICOICO) on social media, according to the SEC.
Sparkster offered investors a slice of its "no-code" software development platform by purchasing SPRK tokens, which claimed to allow users to develop software with minimal technical coding skills. A product demo can still be viewed here.
The SEC seeks “injunctive relief, disgorgement, civil penalties, and other appropriate and necessary equitable relief.” If the charges hold, it would mean Balina would be unable to promote securities again.
The filing also argues that contributions made in Ethereum (ETH) to participate in the ICO all took place in the United States.
"[Users'] ETH contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country," the filing reads. "As a result, those transactions took place in the United States."
The influencer took to Twitter to announce that he was “excited to take this fight public.”
“This frivolous SEC charge sets a bad precedent for the entire crypto industry,” he added. “If investing in a private sale with a discount is a crime, the entire crypto VC space is in trouble.”
Excited to take this fight public.
This frivolous SEC charge sets a bad precedent for the entire crypto industry.
If investing in a private sale with a discount is a crime, the entire crypto VC space is in trouble.
Turned down settlement so they have to prove themselves. 💯 pic.twitter.com/lVaqnnsLgT
— Ian Balina (@DiaryofaMadeMan) September 19, 2022
He added that he had "turned down settlement" with the Commission. The SEC today announced that Sparkster and its CEO Sajjad Daya agreed to settle and pay $35 million to affected Sparkster investors.
Associate director of SEC's enforcement division Carolyn M. Welshhans said that the settlement "allows the SEC to return a significant amount of money to investors and requires additional measures to protect investors, including the disabling of tokens to prevent their future sale."
Actions against Balina "further protects investors by seeking to hold accountable an alleged crypto asset promoter for failures to follow the federal securities laws," she added.
Balina boasted around 143,000 Twitter followers and 110,000 YouTube subscribers at the time of writing, alongside books on Amazon and Audible, and mainstream media appearances in the Wall Street Journal, CNBC, and Forbes.
The Uganda-born entrepreneur left his sales role at IBM to promote crypto full time in 2017, with content such as “How to Make Millions with Initial Coin Offerings (ICOs)” racking up hundreds of thousands of views.
Decrypt has yet to receive commentary from Balina at press time.
Balina’s Sparkster ICO promotion
Balina gave the token a 90% “Hall of Fame” ranking on his ICO investing spreadsheet and promoted it to users of a private Telegram group of around 50 people, according to the SEC’s filing.
The Cayman islands-incorporated firm is now defunct, with the last tweet from their company account being made in 2021.
The SPRK ICO, which the SEC confirmed was unregistered, took place between April and July 2018, raising approximately $30 million from nearly 4,000 investors located abroad and in the United States.
Balina allegedly signed a contract to invest approximately $5 million in the Sparkster offering before promoting the offered SPRK tokens on YouTube, Telegram, and other social media platforms.
Although the SEC claimed he agreed to receive a 30% bonus from Sparkster on the tokens he purchased in the Sparkster Offering, Balina allegedly never publicly disclosed the consideration he received for his promotion.
Editor's note: This article was updated on September 19, 2022, at 6 pm EST to include details about Sparkster and its CEO's $35 million settlement with the SEC.