The Securities and Exchange Commission (SEC) says it has issued a Cease & Desist against Sparkster Ltd., and its CEO Sajjad Daya for offering unregistered digital asset securities. According to the SEC’s complaint, the SPRK token offering took place from April 2018 through July 2018, raising $30 million from 4000 investors in both the US and abroad.
The SEC notes that it has charged Ian Balina, a well-known crypto proponent, for a failure to disclose compensation he received from Sparkster for promoting the digital asset offering and a failure to file a registration statement with the SEC for Sparkster tokens that he resold.
The SEC states that Sparkster and Daya have agreed to settle and to collectively pay more than $35 million into a fund for distribution to harmed investors.
The SPRK tokens were ostensibly issued to raise money to develop Sparkster’s “no-code” software platform. The SEC alleges that Sparkster and Daya told investors that SPRK tokens would increase in value, that Sparkster management would continue to improve Sparkster, and that they would make the tokens available on a crypto trading platform. The SEC’s order also finds that the SPRK tokens, as offered and sold, were securities, were not registered with the SEC, and were not applicable for a registration exemption.
Regarding Balina, a complaint has been filed in the US District Court for the Western District of Texas. The SEC claims that Balina purchased $5 million worth of SPRK tokens and promoted SPRK tokens on YouTube, Telegram, and other social media platforms from approximately May 2018 to July 2018. Balina allegedly failed to disclose that Sparkster had agreed to provide him a 30 percent bonus on the tokens that he purchased, as consideration for his promotional efforts. Balina also allegedly organized an investing pool of at least 50 individuals to whom he offered and sold SPRK tokens, despite not registering the offering with the SEC as required by federal securities laws and despite the lack of an applicable exemption from registration.
Carolyn M. Welshhans, Associate Director of the SEC’s Division of Enforcement, said the resolution with Sparkster and Daya allows the SEC to regurn a significant amount of money to investorse.
“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.”
The SEC’s order finds that Sparkster and Daya violated the offering registration provisions. Without admitting or denying the SEC’s findings, Sparkster has agreed to destroy its remaining tokens, request the removal of its tokens from trading platforms, and publish the SEC’s order on its website and social media channels.
Daya, without admitting or denying the SEC’s findings, agreed to refrain, for a period of five years, from participating in offerings of crypto asset securities.
The SEC requires Sparkster to pay $30 million in disgorgement, $4,624,754 in prejudgment interest, and a $500,000 civil penalty. The SEC’s order imposes a $250,000 civil penalty against Daya.
The SEC’s complaint charges Balina with violating the offering registration provisions and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.