The SEC has issued a cease-and-desist order against the software development company Sparkster Ltd. and its CEO, Sajjad Daya, for an unregistered offer and sale of crypto asset securities from April 2018 through July 2018.

In SEC’s order, Sparkster and Daya raised $30m from 4,000 investors to develop Sparkster’s “no-code” software platform by selling crypto asset securities called SPRK tokens. According to the order, the crypto tokens were sold as securities and investors were told that the tokens would increase in value. Yet the tokens were not registered with the SEC and were not applicable for a registration exemption.

Collectively, Sparkster and Daya have agreed to settle and to pay more than $35m into a fund for distribution to harmed investors.

“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,” said Carolyn M. Welshhans, Associate Director of the SEC’s Division of Enforcement.

The order finds that Sparkster and its CEO Daya have violated the offering registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933.

Without admitting or denying the SEC’s findings, Sparkster Ltd. has agreed to destroy the remaining tokens, request to remove all tokens from trading platforms, and publish the SEC’s order on the company’s website and social media channels.

Sajjad Daya, without admitting or denying the findings, has agreed to refrain from partaking in offerings of crypto asset securities, for a period of five years.

In conclusion, the SEC orders Sparkster to pay $30m in disgorgement, $4,624,754 in prejudgment interest, and a $500,000 civil penalty. The SEC’s order also imposes a $250,000 civil penalty against the CEO Daya.

Charging crypto influencer

In connection to the charges against Sparkster, SEC also charged the crypto influencer Ian Balina, who was promoting the SPRK tokens, for which he failed to report compensation from, as well as not filing a registration statement with the SEC for tokens that he resold.

The complaint against Balina, which was filed in the United States District Court for the Western District of Texas, states that Balina purchased $5m worth of SPRK tokens and promoted them on multiple social media platforms. Besides allegedly failing to address his 30 percent bonus on token sales, the complaint also states that Balina allegedly organized an investing pool for offering and selling SPRK tokens in which at least 50 persons were involved.

Ian Balina has been charged with violating the offering registration provisions of Section 5(a) and (c) of the Securities Act and with violating Section 17(b) of the Act and SEC’s complaint seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

“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.”