Cryptocurrency Influencer Ian Balina Found Guilty of Selling Unregistered Securities

Cryptocurrency YouTuber Ian Balina sold unregistered securities when he bought Sparkster (SPRK) tokens and offered them to United States investors in an investment pool, a federal judge in Texas has ruled.

Texas Judge David Alan Ezra wrote in a May 22 order that "the Court has determined, as a matter of law, that U.S. securities laws are applicable to Balina's actions and that SPRK tokens qualify as securities." The order is, in part, a win for the Securities and Exchange Commission, which brought suit against Balina in 2020.

The court ruled Sparkster (SPRK) was an investment contract under the classic test for whether something is a security—in which investors pool money into a common enterprise expecting profits due to the efforts of others.

Judge Ezra agreed with the SEC that Balina "purposefully targeted United States investors" and shut down an SJ motion by the influencer, who argued the SEC had no jurisdiction because the sales took place abroad. The SEC was not successful in its allegation that Balina failed to disclose a compensation agreement made with Sparkster CEO Sajjad Daya, as the court noted factual discrepancies.

Source: CourtListener

The SEC said in its lawsuit that during May and July of 2018, Balina bought $5 million worth of SPRK and promoted it on a handful of social media websites, creating a Telegram group to set up an investment pool for the tokens.

It said he failed to disclose to investors that Sparkster gave him a 30% bonus for the purchased tokens. Balina argued that the SEC's claimed bonus was actually a volume discount in a standard private pre-sale transaction.

The Sparkster project had pitched itself as a "low-code" blockchain application development platform and its SPRK token initial coin offering (ICO) ran between April and July 2018. The company entered into a settlement with the SEC on Monday, September 12, 2022, to destroy the remaining SPRK and delist it from the trading platforms, without admitting or denying the regulator's claims.

The SEC ordered it to pay a $30 million disgorgement, $4.6 million interest and a $500,000 civil penalty. Balina did not immediately respond to a request for comment.