ICO Promoter Ian Balina Faces Lawsuit From SEC for Unregistered Securities Offering

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The U.S. Secu­ri­ties and Exchange Com­mis­sion charges Token Met­rics CEO Ian Bali­na with offer­ing unreg­is­tered secu­ri­ties in 2018.

Accord­ing to the SEC com­plaint, Bali­na pro­mot­ed SPRK tokens while fail­ing to dis­close com­pen­sa­tions he received from the issuer of the cryp­to asset, Spark­ster Ltd. Fur­ther­more, the SEC alleges that Bali­na signed a con­tract bind­ing him to invest $5 mil­lion in Sparkster’s Ini­tial Coin Offer­ing in return for a 30% bonus and to pro­mote the asset on social media. Bali­na had failed to dis­close the 30% bonus to the SEC, accord­ing to the agency.

He also alleged­ly failed to file a reg­is­tra­tion state­ment with the SEC for sell­ing the SPRK tokens to mem­bers of an invest­ment pool.

Bali­na, a 33-year-old Ugan­dan with Amer­i­can cit­i­zen­ship, rose to fame after pub­li­ciz­ing a spread­sheet in 2017 with infor­ma­tion on all his invest­ments that were report­ed­ly accessed by over one mil­lion investors month­ly. This ini­tia­tive mor­phed into Token Met­rics, a cryp­to invest­ment research com­pa­ny, over which he cur­rent­ly serves as chief exec­u­tive. The spread­sheet dubbed the “ICO spread­sheet” con­tained a list of what Bali­na deemed were the most lucra­tive Ini­tial Coin Offer­ings of a par­tic­u­lar year.

SEC Allegations against Balina

An ini­tial coin offer­ing is the cryp­tocur­ren­cy ana­log of an ini­tial pub­lic offer­ing and is used to raise funds for the issuer of a new cryp­tocur­ren­cy. The issuer offers the new cryp­to assets in exchange for bit­coin, ether, or fiat cur­ren­cy and often relies on the pro­mo­tion­al efforts of promi­nent social media influencers.

Accord­ing to the SEC, Sparkster’s Ini­tial Coin Offer­ing occurred in 2018 on the Ethereum blockchain. The company’s whitepa­per stat­ed that the funds raised would fund a “no-code” soft­ware pro­gram­ming appli­ca­tion, an MIT-inspired ini­tia­tive designed to teach cod­ing to chil­dren. The appli­ca­tion would run on a type of decen­tral­ized cloud.

Spark­ster tapped Bali­na to pro­mote the ICO ear­ly on. An inter­nal Spark­ster chat revealed the CEO’s inten­tion. “Ian Beli­na [sic] took an ICO from 12 mil­lion tokens sold to 36 mil­lion sold in 1 day … Because it came up high on his spread­sheet … Get­ting Ian is gonna be easy.”

Fol­low­ing Sparkster’s win­ning of a con­test host­ed by Bali­na, Bali­na asked Spark­ster to grant him a larg­er allo­ca­tion of SPRK than was allowed by oth­er investors in the region of $3,500,000. Sub­se­quent nego­ti­a­tions result­ed in Bali­na sign­ing a con­tract to pur­chase $5,000,000 in SPRK which includ­ed a 30% SPRK bonus. The influ­encer then ear­marked SPRK as the top ICO for that year on his spreadsheet.

Accord­ing to the SEC, Bali­na failed to com­ply with fed­er­al secu­ri­ties laws by not dis­clos­ing that he received funds from a secu­ri­ties issuer with the asso­ci­at­ed amount. He also fell afoul of fed­er­al law after offer­ing rough­ly 50 peo­ple a share in his boun­ty of SPRK by con­tribut­ing ETH to an invest­ment pool, a move dubbed by the SEC as an unreg­is­tered secu­ri­ties offering.

The SEC requests a judg­ment for­bid­ding Bali­na from vio­lat­ing Sec­tion 17(b) of the Secu­ri­ties Act [15 U.S.C. § 77q(b)] and par­tic­i­pat­ing in secu­ri­ties sales. Fur­ther, the agency advo­cates the dis­burse­ment of fraud­u­lent­ly-acquired funds and the pay­ment of civ­il penalties.

Show me proof, says Balina

“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. Turned down set­tle­ment, so they have to prove them­selves,” Bali­na tweet­ed in response to the charges.

In a 2017 inter­view, Bali­na said, “From my YouTube chan­nel, I got a big following…But nobody had real­ly dis­tilled ICO invest­ing in a very thor­ough yet sim­ple manner.”

Until now, the SEC had not flagged any of Balina’s ear­li­er ICO activities.

For Be[In]Crypto’s lat­est Bit­coin (BTC) analy­sis, click here.


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