The U.S. Securities and Exchange Commission (SEC) filed a federal lawsuit Monday against Ian Balina, founder and CEO of Token Metrics, citing his violation of the US securities law, by his involvement with an unregistered Initial coin offering (ICO) for Sparkster token (SPRK) in 2018.
The proposed charges centred around the ICO of Cayman islands-based issuer, Sparkster Ltd. The ICO, which was concluded in 2018, raised $30 million from more than 4000 participants in the US and around the world.
According to the court filing, the SEC charged Ian Balina with promoting an "unregistered securities offering" of crypto asset SPRK tokens and lack of disclosure of the remuneration he received for his promotion.
Balina responded, in a tweetstorm, stating that the proposed charges issued by the SEC were "based on multiple misconceptions of fact and law"
Notably, the SEC's filing included a full-throated claim to jurisdiction over the entire Ethereum ecosystem; an audacious claim that indicates the second largest cryptocurrency might soon get entangled in a whirlpool of regulatory vicissitude.
“The U.S.-based investors in Balina’s pool irrevocably committed to the transaction when, from within the United States, they sent their ETH contributions to Balina’s pool. At that point, their ETH contributions were validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.
About 45% of Ethereum validators are operating from the United States, according to Etherscan. The second-largest node operator is Germany, with about 19%. Some critics of the Ethereum Merge, have argued that the transition comes at the cost of more centralization since a large percentage of node operators, in the US are inches away from probable regulatory scrutiny and censorship.
After the successful completion of The Merge, SEC Chair Gary Gensler asserted that the transition could bring the Ethereum network closer to the definition of security in the eyes of the government. It remains to be seen whether or not the leadership within SEC will eventually classify Ethereum as an unregistered security. Gary Gensler, SEC Chair is yet to take a stance on the matter.