Cryptocurrency Analyst Was Paid $5 Million to Push ICO, SEC Says

Chris Dolmetsch, Bloomberg News

A flag outside the U.S. Securities and Exchange Commission headquarters in Washington, D.C., U.S., on Wednesday, Feb. 23, 2022. Hedge funds and other investors would have less time to disclose that they've acquired a significant stake in a company under new rules proposed by the SEC. Photographer: Al Drago/Bloomberg , Bloomberg

(Bloomberg) -- The founder of a cryptocurrency investment research firm was accused by the SEC of promoting an initial coin offering without disclosing that he had been given incentives to do so.

Ian Balina, 33, promoted the SPRK token on social media platforms including YouTube and Telegram without revealing that he had been compensated by the company that offered it, the Securities and Exchange Commission said in a suit filed Monday in federal court in Austin, Texas.

While the SEC didn’t identify Balina’s firm, the description matches that of Token Metrics, an Austin-based firm that provides “AI-based cryptocurrency ratings and price predictions.” Balina’s bio on the site describes him as a “former IBM Watson Analytics evangelist” who has “built million-dollar businesses from the ground up.”

Balina, a self-described crypto asset investor, promoter and influencer, documented his investment process and research on YouTube and other social media outlets through an online diary called “Diary of a Made Man.”

The SEC said the company behind SPRK, Sparkster Ltd., a software development company incorporated in the Cayman Islands, raised about $30 million from almost 4,000 investors in an unregistered offering that took place between April and July 2018.

Sparkster and Chief Executive Officer Sajjad Daya agreed to pay $35 million into a fund for harmed investors to resolve SEC’s claims over the unregistered offer and sale of the SPRK tokens, the regulator said in a Monday statement.

According to the SEC, Balina asked Sparkster for an allocation of the coin before he began promoting it on social media. The company agreed to let him purchase approximately $5 million worth. It also gave him a 30% bonus in tokens.

The SEC further accused Balina of organizing an investing pool of about 50 people and offered them the chance to buy tokens from him upon their release without registering.

Balina’s lawyer, Stephen Galebach, on Monday pointed to a November submission in which he called allegations against his client “an unfounded effort, based upon multiple misconceptions of fact and law” that he said “would have the effect of barring or limiting Mr. Balina from personal involvement in a highly successful analytical and publishing cryptocurrency-focused business that he has built over the past two years.”

The case is SEC v Balina, 22-cv-950, US District Court, Western District of Texas (Austin).

(A previous version of this story corrected the description of benefit to Balina throughout.)