SEC wins over YouTube Ian Ballina for unregistered crypto ICO promotion
Crypto YouTuber Ian Ballina bought Sparkster (SPRK) tokens and sold unregistered securities to US investors in an investment pool, a Texas federal court judge has ruled.
“The court has determined as a matter of law that US securities laws apply to Balina's actions and that the SPRK tokens are collateral,” Judge David Alan Ezra said in a May 22 order. Commission (SEC), which filed the lawsuit in 2022.
The court found that SPRK is an investment contract under the securities-determination Hawaii test—one in which investors pool into a joint venture an expectation of profit due to the efforts of others.
Ezra Ballina agreed with the SEC that it “deliberately targeted U.S. investors” and knocked back the influencer's summary judgment bid, saying the SEC didn't care because the sale took place overseas.
The court found a factual inconsistency and found the SEC unsuccessful in its claim that Ballina failed to properly disclose the compensation agreement with Sparkster CEO Sajjad Daya.
Ballina's lawyer, Michael Navarre of BT Navarre Strama PC, told Cointelegraph that Ballina was “disappointed by the order” and disagreed with the court's decision.
Ballina plans to appeal “as soon as possible.”
The SEC alleges that between May and July 2018, Ballina purchased $5 million worth of SPRK, promoted it on multiple social media platforms, and had Telegram Group create an investment pool for the tokens.
He added that he did not tell investors that Sparkster gave him a 30% bonus for the tokens he bought. Ballina said the SEC's alleged bonus was a standard vote discount in a private presale deal.
Navarre added that Ballina was “tricked into buying worthless Sparkster tokens by Sparkster.”
“After the SEC demanded that Sparkster pay more than $35 million in fines, the SEC brought this action against Ian. This case is another example of the SEC trying to expand its authority over cryptocurrency to become the world's crypto police,” Navarre said.
Related: Uniswap Responds to SEC Wells Notice: ‘We're Ready to Fight for DeFi'
Sparkster promotes itself as a “low code” blockchain application development platform and held an initial coin offering (ICO) of the SPRK token between April and July 2018.
In September 2022, it reached an agreement with the SEC to liquidate the remaining SPRK tokens and remove them from exchanges, without admitting or denying the regulator's claims. The SEC ordered it to pay $30 million in disgorgement, $4.6 million in interest and a $500,000 civil penalty.
Magazine: 7 ICO Options for Blockchain Fundraising: Crypto Airdrops, IDOs and More
Update (May 26, 10:15 p.m. UTC): This article has been updated to add comments from Ian Ballina's attorney, Michael Navarre.
