U.S. regulators have charged a crypto “influencer” for touting cryptoassets without disclosing that he was being compensated for his efforts.
The U.S. Securities and Exchange Commission (SEC) settled allegations with software development company Sparkster Ltd. and its CEO Sajjad Daya for selling unregistered cryptoasset securities. The regulator also charged influencer Ian Balina for failing to disclose compensation that he received from Sparkster for publicly promoting its tokens.
According to the SEC’s order, Sparkster and Daya raised US$30 million from investors around the world selling SPRK tokens to finance the development of its software platform. They told investors the tokens would increase in value and that they would be traded on a crypto-trading platform.
The SEC concluded that the tokens represented securities, which were not registered with the SEC and didn’t qualify for an exemption.
Sparkster and Daya agreed to settle the allegations without admitting or denying the SEC’s findings.
Under the terms of the settlement, Sparkster agreed to destroy its remaining tokens and to request their removal from trading platforms. Daya also agreed to a five-year ban from participating in cryptoasset securities offerings.
They also agreed to pay more than US$35 million in penalties, disgorgement and prejudgement interest.
“The resolution with Sparkster and Daya allows the SEC to return a significant amount of money to investors and requires additional measures to protect investors, including the disabling of tokens to prevent their future sale,” said Carolyn Welshhans, associate director of the SEC’s enforcement division, in a release.
At the same time, the SEC alleged that Balina promoted SPRK tokens on YouTube, Telegram and other social media platforms without disclosing that he received compensation for those efforts, and that he re-sold tokens to investors without registering with the SEC.
Those allegations have not been proven.
On Twitter, Balina, founder and CEO of crypto research firm Token Metrics Inc. wrote: “Excited to take this fight public. This frivolous SEC charge sets a bad precedent for the entire crypto industry.”
“If investing in a private sale with a discount is a crime, the entire crypto VC space is in trouble,” he added. “Turned down settlement so they have to prove themselves. 💯”
Welshhans said the SEC’s action against Balina “further protects investors by seeking to hold accountable an alleged crypto asset promoter for failures to follow the federal securities laws.”