SEC Orders Cryptocurrency Firm to Pay Harmed Investors $35 Million

The Securities and Exchange Commission (SEC) has ordered cryptocurrency firm Sparkster and its CEO to pay $35 million into a fund to be distributed to harmed investors. The securities regulator also accused crypto influencer Ian Balina of promoting cryptocurrency tokens without disclosing the compensation received.

SEC Cease and Desist Order Against Unregistered Cryptocurrency Company

The Securities and Exchange Commission (SEC) announced on Monday that it had issued a cease and desist order against Sparkster Ltd. and its CEO, Sajjad Daya, “for the unregistered offer and sale of crypto-asset securities from April 2018 to July 2018.

The SEC explains that “by offering and selling crypto-asset securities called SPRK tokens” in order to raise funds to develop the Sparkster software platform:

Sparkster and Daya have raised $30 million from 4,000 investors in the United States and abroad.

They told investors that SPRK tokens would go up in value, promising to make the tokens available on a cryptocurrency trading platform.

As part of a settlement with the SEC, Sparkster agreed to destroy its remaining cryptocurrency tokens, request the removal of its tokens from trading platforms, and post the SEC’s order on its website and its social media channels. Daya has agreed to refrain from participating in crypto-asset securities offerings for five years.

The SEC detailed:

Sparkster and Daya agreed to collectively settle and pay more than $35 million into a fund to be distributed to aggrieved investors.

Crypto Influencer Ian Balina Accused by SEC

The securities regulator also announced on Monday that it had “indicted crypto influencer Ian Balina for failing to disclose the compensation he received from Sparkster for publicly promoting his tokens and for failing to file a registration statement with the SEC for the Sparkster tokens he resold.

The SEC explained that Balina purchased $5 million worth of SPRK crypto tokens and promoted it on Youtube, Telegram, and other social media between approximately May and July 2018. The regulator has developed:

Balina reportedly failed to disclose that Sparkster agreed to provide him with a 30% bonus on the tokens he purchased, in return for his promotional efforts.

The crypto influencer also allegedly organized an investment pool of at least 50 people to whom he offered and sold the unregistered tokens, the securities watchdog noted.

Balina is accused of violating the offering registration provisions of securities law, the SEC detailed, adding that it “is seeking an injunction, disgorgement plus prejudgment interest, and civil penalties.

In response to the SEC announcement, Balina tweeted: “Excited to make this fight public. This frivolous accusation by the SEC sets a bad precedent for the entire crypto industry. If investing in a private sale at a discount is a crime, the entire crypto VC space is in trouble. The settlement was declined, so they need to prove themselves.

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