Crypto company Sparkster and its chief executive were ordered by the US Securities and Exchange Commission (SEC) to pay $35 million that would be distributed to investors who had been harmed.
Ian Balina, the crypto influencer, was also charged by the SEC for promoting crypto tokens without disclosure of the compensation he had received for it.
Cease and desist
On Monday, the SEC disclosed that a cease-and-desist order had been issued against Sparkster Ltd. and Sajjad Daya, its CEO.
According to the securities regulator, this was due to their unregistered offering and sale of crypto asset securities between April and July 2018.
The SEC elaborated that in order to develop the software platform of the company, crypto asset securities known as SPRK tokens had been offered and sold by Sparkster.
The regulatory authority stated that a sum of $30 million had been raised by the company and its chief executive from approximately 4,000 investors in the United States and abroad.
The investors had been told that the value of these SPRK tokens would increase and had also promised to get the tokens listed on a crypto trading platform.
The settlement
Sparkster has reached a settlement with the SEC, which includes destroying the remaining SPRK tokens it has, getting them removed from trading platforms and publishing the order of the SEC on its website and its social channels.
Moreover, the CEO has also agreed that he will not participate in offerings of crypto asset securities for the next five years.
The SEC also agreed that the company and Daya had also agreed to set up a fund that would have $35 million dollars used to pay to investors who had been harmed.
Influencer charged
Another announcement on Monday from the SEC disclosed that they had charged influencer Ian Balina over his failure of disclosing that he had been compensated for promoting SPRK tokens.
He had promoted the tokens publicly for compensation from Sparkster. He had also resold Sparkster tokens and had not filed a registration statement with the regulator for the sale.
According to the SEC, Balina had bought SPRK tokens worth $5 million, which he had then promoted on social media channels like Telegram, YouTube and others.
He engaged in these activities from May to July 2018. The SEC said that a 30% bonus had been offered to Balina on the tokens he had bought.
This was the consideration he received for his promotion. An investing pool had also been organized by the influencer that comprised of 50 individuals.
The securities watchdog said that Balina had sold the unregistered tokens to these people. He was in violation of the Securities Act’s registration provisions.
Balina also responded to the announcement of the SEC and said that he wanted to have this fight publicly because the charge was frivolous and would be a bad precedent for the entire crypto industry.
He said that if it was a crime to get a discount on a private sale, then the entire VC space should be in hot water.
