Crypto YouTuber Ian Balina has been found guilty of selling unregistered securities after purchasing Sparkster (SPRK) tokens and offering them to US investors in an investment pool, according to a ruling by a Texas federal court judge. The judge stated that US securities laws apply to Balina’s actions and that SPRK tokens qualify as securities. The court determined that SPRK was an investment contract under the Howey test, as investors pooled money into a common enterprise with the expectation of profits from the efforts of others. The court also agreed with the Securities and Exchange Commission (SEC) that Balina targeted US investors and rejected his claim that the sales occurred overseas and were therefore not subject to SEC jurisdiction. The SEC alleged that Balina failed to disclose a compensation agreement with Sparkster CEO Sajjad Daya, although the court found factual inconsistencies in this claim. Balina purchased $5 million worth of SPRK tokens between May and July 2018, promoted them on social media, and created an investment pool on Telegram. The SEC claimed that Balina did not inform investors about the 30% bonus he received from Sparkster for the tokens he purchased. Balina argued that the bonus was a standard volume discount in a private presale deal. Sparkster, a “low-code” blockchain application development platform, conducted its SPRK token initial coin offering (ICO) from April to July 2018. In September 2022, Sparkster reached a settlement with the SEC to destroy its remaining SPRK tokens and remove them from trading platforms, without admitting or denying the regulator’s claims. Sparkster was ordered to pay a $30 million disgorgement, $4.6 million in interest, and a $500,000 civil penalty. Balina has not yet commented on the ruling.
SEC emerges victorious in lawsuit against YouTuber Ian Balina for promoting unregistered cryptocurrency ICO