the United States District Court for the Western District of Texas has granted partial summary judgment in favor of the Securities and Exchange Commission (SEC) against crypto influencer Ian Balina.
The court found that Balina offered and sold SPRK tokens as securities in unregistered transactions, confirming that U.S. securities laws apply to its activities.
SPRK considered certainty
The SEC’s complaint, filed on September 19, 2022, alleged that Balina purchased $5 million worth of SPRK tokens from Sparkster, Ltd. in May 2018. He then allegedly organized an investment pool of approximately 68 individuals, to whom he sold SPRK had offered and sold. tokens without registering the offering with the SEC as required by federal securities laws.
The SEC also alleged that from May to July 2018, Balina promoted SPRK tokens on YouTube, Telegram and other social media platforms without disclosing a 30 percent bonus provided by Sparkster as compensation for its promotional efforts.
The SEC charged Balina with violating the registration of offering provisions of Sections 5(a) and 5(c) of the Securities Act of 1933 and with violating Section 17(b) of the Securities Act for failing to disclose the compensation he had received for his promotions.
The regulator had sought partial summary judgment on the unregistered offering violation and requested a ruling that SPRK tokens were offered and sold as securities.
In addition to his allegations, the SEC also published an order subject to penalty against Sparkster Ltd. and its CEO, Sajjad Daya. The company contributed more than $35 million to a fund for injured investors and paid various other fees and fines.
Promotional costs remain
The SEC additionally alleged that Balina promoted SPRK tokens on YouTube, Telegram, and social media between May and July 2018. He allegedly failed to disclose that Sparkster Ltd. offered him a 30% bonus on his token purchases in exchange for his promotions.
The promotional costs are subject to Section 17(b) of the Securities Act.
Balina moved for summary judgment on both SEC claims. The court denied his requests and did not rule on Article 17(b) claims as a matter of law, leaving the promotional costs in play.