The United States Securities and Exchange Commission (SEC) has sued Cayman Islands-based software development firm Sparkster Limited for conducting an unregistered token sale that generated about $30 million.
SEC Charges Crypto Firm Sparkster
In April 2018, Sparkster published a whitepaper claiming that users could partake in an initial token offering (ICO) for its token, SPRK. A month later, the company began its presale for investors willing to make a “minimum investment of $25,000.”
In July 2018, Sparkster conducted a “crowdsale,” where it sold more of its SPRK tokens. The firm conducted the sales on the Ethereum blockchain, where it sold its tokens to investors in return for ETH.
According to the SEC complaint, Sparkster promoted the sale of its tokens through social platforms, while promising investors that the token will be listed on crypto trading platforms.
Reassuring investors that the token will appreciate, the company sold its SPRK tokens at a trading price of approximately $0.15. However, the token is currently trading at $0.007, representing a 95% loss amid a broader market decline.
Crypto Influencer Charged for Promoting SPRK
Sparkster’s SPRK tokens were promoted through various social platforms. Ian Balina, a crypto maximalist and YouTuber, was mentioned as a promoter of the token sale.
He purchased $5 million worth of SPRK and then resold the tokens to others via his social accounts. While doing this, he coordinated “an investing pool,” comprising about 50 people to conduct secondary sales.
The charge on Balina reveals that he failed to disclose to the public the fact that he was being rewarded with a 30% bonus by Sparkster. It added that he contributed to violating the federal securities law that mandates companies to register their offerings.
Way Forward
After accumulating $30 million from about 4000 investors, including U.S.-based investors, Sparkster has now incurred the wrath of the SEC.
Regarding the penalties to be faced by the company and its CEO, Sajjad Daya, Carolyn M. Welshhans, Associate Director of the SEC’s Division of Enforcement said:
“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.”
Currently, Sparkster has undertaken to destroy all SPRK tokens in its custody and also make requests for its tokens to be removed from trading platforms within 10 days of the given order. The firm has also agreed to publish a notice of the given order on its website and social accounts in a manner acceptable to the regulatory watchdog.
