SEC emerges victorious in lawsuit against YouTuber Ian Balina over unregistered promotion of crypto ICO

Crypto YouTuber Ian Balina has been found guilty of selling unregistered securities by a Texas federal court judge. The judge ruled that Balina’s purchase of Sparkster (SPRK) tokens and his offering of them to US investors in an investment pool qualified as securities under US securities laws. The court determined that the SPRK tokens met the criteria of an investment contract under the Howey test, as investors pooled their money into a common enterprise with the expectation of profits from the efforts of others. The judge also agreed with the Securities and Exchange Commission (SEC) that Balina intentionally targeted US investors. However, the court dismissed the SEC’s claim that Balina failed to disclose a compensation agreement with Sparkster’s CEO due to factual inconsistencies. The SEC’s lawsuit stated that Balina purchased $5 million worth of SPRK tokens between May and July 2018 and promoted them on various social media platforms, forming an investment pool through a Telegram group. Balina did not disclose that Sparkster had given him a 30% bonus for the tokens. Sparkster conducted its SPRK token initial coin offering (ICO) from April to July 2018, promoting itself as a “low-code” blockchain application development platform. In a settlement with the SEC, Sparkster agreed to destroy its remaining SPRK tokens and pay a disgorgement of $30 million, interest of $4.6 million, and a civil penalty of $500,000. Balina has not yet commented on the ruling.