YouTuber Ian Balina lost the case against the Securities and Exchange Commission recently. As per the report, a federal United States judge issued the verdict in favor of the SEC noting that YouTuber violated the security laws by taking part in Initial Coin Offering in 2018. The YouTuber was charged with selling unregistered securities when he purchased Sparkster tokens.
He offered the SPRK tokens to US investors via an investment pool according to a Texas federal court judge ruling. The remarks of the judge indicated that on legal grounds the Court has concluded that securities laws are applicable to Balina’s actions and SPRK tokens are legally classified as security offerings. Judge David Alan Ezra mentioned in a summary judgment notification issued on 22nd May 2024.
The judge also granted a verdict partially in favor of the Securities and Exchange Commission. The case was brought by the regulatory agency in 2022. The court has found SPRK liable as an investment contract in the light of the Howey Test.
According to the prosecutors, the investors pooled funds into an enterprise with an expectation to earn profits on account of efforts made by others.
YouTuber Targeted Only US Investors
Speaking on the lawsuit Judge Ezra noticed that the YouTuber in question specifically targeted investors based in the United States. He issued a knock back at the summary judgment, noting that the SEC did not sway in the matter as the sales of SPRK tokens took place overseas.
SEC could not manage to prove that Balina refrained from disclosing a compensation agreement with Sparkster CEO Sajjad Daya.
The court noticed that these claims from SEC contained various factual inconsistencies. Michael Navarre, the legal representative for Balina told Cointelegraph that the influencer was disappointed with the court order and disagreed with the decision. He further revealed that the YouTuber intends to file an appeal as soon as possible.
SEC noted in the lawsuit that for May and July 2018, Balina bought around $5 million in SPRK and promoted it on various social media platforms. He also set up a Telegram group that operated as an investment pool for SPRK tokens.
At the same time, he did not share with investors that SPRK management granted him a 30% bonus for his token purchases. Balina noted that the alleged bonus mentioned by SEC was a standard volume discount for private presale participants.
SEC Asked Sparkster to Pay $35 Million in Penalty
Navarre of Beatty Nacarre Strama P.C. unveiled that Balina was misled by Sparkster while purchasing tokens that were worthless. SEC directed Sparkster to pay $35 million in penalties and brought action against Ian.
The lawsuit is serving as an example of the SEC attempting to increase its jurisdiction over the crypto sector to become the top regulatory agency for the industry around the globe as per Navarre.
He added that Sparkster tried to introduce itself as a drag-and-drop blockchain development application. The project organized the initial coin offering during April and July 2018.
In September 2022, the project signed a deal with the SEC to destroy the remainder of SPRK tokens and remove them from trading platforms without admitting or denying the charges brought by the regulators.
SEC ordered the firm to pay $30 million in disgorgement and $4.6 million in interest and a $500,000 civil penalty. Another report revealed that in 2017, ICOs gained major traction riding on the back of activities taking place in the crypto sector.
Regardless of the myriad of scams and fraudulent attacks, ICOs continued to boom and accounted for supporting the best crypto projects in the industry such as Ethereum, Filecoin, Chainlink, Tezos, and EOS etc.
Rise of ICO-backed Crypto Projects
However, the raving success of multiple ICO projects did not secure it against several legal troubles. The gradual rise of ICO-backed projects gained major traction and cemented their positions as reliable investments and attracted the attention of SEC.
SEC also took legal action against Block.one and directed its parent firm EOS network to pay $24 million in fines as the firm failed to register as an ICO or qualify for a registration exemption.
