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SEC settles with Sparkster ICO project for $35M, digital asset influencer charged

SEC settles with Sparkster ICO project for $35M, digital asset influencer charged

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The US Securities and Exchange Commission (SEC) continues to pursue ICO projects that raised millions of dollars during the 2017-2018 ICO mania and pursue penalties. The latest culprit is Sparkster, a blockchain project that raised $30 million in a 2018 ICO, and Ian Balina, an influencer who pumped tokens and later dumped them.

The SEC revealed in a press release this week that it had issued a cease and desist order against Sparkster for selling unregistered securities in its ICO. In addition, it accused Balina of failing to disclose that he received compensation for promoting Sparkster’s tokens.

The SEC complaint, filed in the Western District of Texas, alleges that Sparkster began developing a codeless platform in 2016 and published its white paper in April 2018. It claimed it would use its network through decentralized cloud software for smartphones, laptops, and other devices that would then be awarded the SPRK token.

It conducted an ICO a few months later, and while it stated on its website that the tokens were not available to US residents, it made no attempt to enforce this (sound familiar?). US residents, including Balina, were able to invest millions of dollars in SPRK tokens.

Balina allegedly invested $5 million worth of tokens, in addition to receiving a 30% bonus in SPRK. Since the ICO was closed to US residents, Balina’s sales contract claimed to be Ugandan, with a Ugandan passport and utility bill.

The same day she made the purchase, Balina began pushing the project relentlessly on her social media accounts, especially her YouTube channel. He did not reveal anything about this to the thousands of investors who took his advice and bought SPRK tokens. Private chats between Sparkster executives dated in 2018 claim that on the first day of his promotion, SPRK’s sales tripled.

The SEC has ordered Sparkster to pay a $30 million disgorgement, $4.6 million in additional interest and a $500,000 civil penalty. CEO Sajjad Daya must pay $250,000 in civil penalties.

Accused of violating the Securities Act, Balina must pay an injunction, prejudgment interest, termination and civil penalties.

This is the latest move that comes at a time when the SEC is making every effort to become the official Bitcoin regulator. It faces stiff competition from the Commodity Futures Trading Commission (CFTC), which has the support of several members of Congress.

See: BSV Global Blockchain Convention Panel, Law and Order: Blockchain and Digital Asset Regulatory Compliance

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New to Bitcoin? Check out CoinGeek Bitcoin for beginners section, the definitive resource guide to learn more about Bitcoin – as originally designed by Satoshi Nakamoto – and blockchain.

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