SEC Files Lawsuit Against Token Metrics Founder for Promoting and Offering Unregistered Securities
The U.S. Securities and Exchange Commission (SEC) has slammed Ian Ballina, the founder of Token Metrics, with a lawsuit alleging that his involvement with Sparkster Token (SPRK) amounted to offering and promoting unregistered securities.
In the court documents filed by the SEC in the U.S. District Court, Western District of Texas Austin Division on September 19, the regulator spelt out that the offences Ballina, 33, committed in violation of the U.S. Securities Act were twofold.
For one, the SEC claims that the “self-described crypto asset investor, promoter, and influencer” failed to disclose that he was receiving compensation from Sparkster Labs, the issuer of SPRK, while publicly promoting the unregistered security token.
Secondly, he also promoted and offered his unregistered security when he failed to file a registration statement with the commission for the tokens he re-sold after investing $5 million in the offering using an investing pool that he organized for about 50 persons on Telegram.
The offenses date back to the Sparkster Token Initial Coin Offering (ICO) between April and July 2018. At the time, the Cayman Islands incorporated company illegally raised approximately $30 million from nearly 4,000 investors based broadly in the U.S.
Ballina signed a contract to invest in the offering and promoted the offered SPRK tokens on YouTube, Telegram, and other social media platforms. He also received a 30% bonus from the company for the tokens he purchased but never publicly disclosed his consideration for this promotion, the SEC found.
The SEC is seeking a jury trial, as well as requesting penalties including injunctive relief, disgorgement, civil penalties, and other
appropriate and necessary equitable relief from the Token Metrics CEO who is resident in Texas.
“Because of Balina’s influence as an ICO promoter, Sparkster’s CEO understood that if the Sparkster Offering was included in Balina’s ICO spreadsheet and promoted through his social media channels, it would reach his large audience of crypto asset investors and enthusiasts, drawing attention and investors to the Sparkster Offering,” the charges said.
Sparkster continues to remain an ICO-era oddity
The SEC action against Balina comes after SPRK token ICO investors have seen their funds stuck in limbo for years. The company has also failed to deliver on its promise to build a blockchain-based decentralized platform for launching no-code software – so far has released only demos.
Earlier this year, popular blockchain security researcher Zachxbt disclosed on Twitter that the seemingly inactive project was moving around funds in its wallets. The wallets became active after three years only to convert more than $22 million worth of ether (ETH) to USDC.
Community members have made attempts to notify the Circle, the issuer of the USDC stablecoin, of the funds. Meanwhile, the ICO investors last tried to file a lawsuit against the company back in 2019.