On
Wednesday,
a
Texas
federal
court
judge
ruled
in
favor
of
the
US
Securities
and
Exchange
Commission
(SEC)
in
the
case
against
crypto
influencer
Ian
Balina.
The
case
is
part
of
the
Sparkster
saga
that
started
in
2018.
The
Case
Against
The
Crypto
Influencer
In
2022,
influencer
and
Token
Metrics
CEO
Ian
Balina
was
accused
of
violating
securities
laws.
The
SEC
charged
Balina
for
his
involvement
in
the
Initial
Coin
Offering
(ICO)
of
an
unregistered
security.
According
to
the
court
documents,
Software
development
company
Sparkster
Ltd
conducted
an
unregistered
securities
offering
with
the
Sparkster
(SPRK)
token
between
April
and
July
2018.
The
ICO
raised
around
$30
million
from
4,000
US-based
and
international
investors.
The
Commission
argues
that
Balina
violated
Sections
5(a)
and
5(c)
of
the
Securities
Act
after
selling
and
offering
to
sell
unregistered
securities
through
his
Sparkster
pool.
Moreover,
they
alleged
that
the
crypto
influencer
failed
to
disclose
the
“considerations
received”
from
buying
and
promoting
the
token,
violating
Section
7.
In
the
lawsuit,
the
SEC
claimed
that
Balina
had
agreed
to
receive
a
30%
bonus
from
Sparkster
for
purchasing
43,333,333
SPRK
tokens
at
$0.15.
This
bonus
was
part
of
a
deal
between
the
crypto
influencer
and
the
company’s
CEO,
Sajjad
Daya.
Daya
and
Balina
allegedly
negotiated
a
contract
in
May
2018,
in
which
YouTubers
would
buy
and
promote
the
SPRK
tokens
on
their
platforms.
In
the
following
months,
Balina
endorsed
his
“Sparkster
Private
Sale
Whitelist”
to
his
Patreon
and
Telegram
members.
However,
the
influencer
failed
to
address
his
contract
with
the
company
while
promoting
the
token.
Instead,
he
stated
it
was
“not
a
paid
endorsement”
and
that
he
“was
not
paid
off
by
Sparkster”
on
different
occasions.
Judge
Grants
Victory
To
The
SEC
Balina
contended
the
SEC’s
claims
in
November
2022.
He
argued
“he
was
fooled
by
Sparkster,”
adding
that
he
lost
money
after
purchasing
the
crypto
tokens,
like
the
other
pool
members.
He
also
denied
receiving
compensation
for
recommending
the
SPRK
tokens.
The
influencer
alleged
receiving
“a
volume
discount
during
a
private
pre-sale
purchase,”
the
same
“other
purchasers
typically
received
in
the
industry.”
Moreover,
the
defendant
claimed
that
the
Court
should
“grant
Summary
Judgment
in
his
favor”
since
the
SPRK
tokens
were
not
securities.
Similarly,
the
court
documents
revealed
that
the
YouTuber
considered
that
“liability
did
not
attach
in
the
United
States”
as
he
was
outside
the
country
during
the
promotional
period.
On
May
22,
Judge
David
Alan
Ezra
ruled
in
favor
of
the
SEC.
The
Court
granted
the
Commission
partial
victory
and
denied
Balina’s
Motion
for
Summary
Judgment.
Excerpt of Judge Ezra's ruling. Source: CourtListener
As
seen
in
the
document,
the
Court
considered
that
the
influencer’s
ties
to
the
US
were
sufficient
to
show
he
“purposefully
targeted”
American
investors.
This
decision
was
based
on
the
use
of
US
social
media
platforms
and
the
larger
share
of
US-based
investors
in
the
Sparkster
pool.
Judge
Ezra
also
considered
that
Balina
had
violated
Securities
laws
as
there
was
“sufficient
evidence
to
show
that
Sparkster
sought
money
from
investors,”
and
STRK
tokens
meet
the
criteria
of
the
Howey
test.
Ultimately,
the
SEC
failed
to
prove
that
the
influencer
violated
Section
7.
The
court
stated
that
there
were
factual
inconsistencies
in
whether
there
was
a
prior
agreement
for
compensation
in
exchange
for
promotion.
As
a
result,
the
court
declined
to
decide
this
issue
on
summary
judgment.
Total crypto market cap is at $2.47 trillion in the weekly chart. Source: TOTAL on TradingView
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Author: Rubmar Garcia
