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SEC claims jurisdiction over ETH transactions since a majority of nodes are in the U.S.

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(Kitco News) - An interesting development has arisen out of the latest lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against the YouTube influencer Ian Balina for allegedly conducting an unregistered securities offering. 

Tucked within the lawsuit charging Balina with conducting an unregistered offering of Sparkster (SPRK) tokens when he formed an investing pool on Telegram in 2018, the SEC claimed that Ethereum transactions occur in the United States due to the fact that Ethereum nodes are “clustered more densely” in the U.S. than in any other country. 

According to the SEC, at the time that Balina’s investing pool received investments from contributors in the U.S., the contributed funds 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 of the clustered nodes, the SEC has argued that “those transactions took place in the United States.” At this point, it remains to be seen whether this claim by the SEC will hold up in court or whether the is a legal precedent at stake. 

Data from Ethernodes shows that at the time of writing, 42.97% of the 7869 Ethereum nodes currently in operation are located in the U.S. 

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Ian Balina responds

Balina has pushed back against the charges from the SEC, saying that he is “excited to take this fight public.”

“This frivolous SEC charge sets a bad precedent for the entire crypto industry. If investing in a private sale with a discount is a crime, the entire crypto VC space is in trouble,” Balina tweeted. “Turned down settlement so they have to prove themselves.”

The SEC is looking to recover Balina’s profits from the promotions and impose civil penalties on the social media influencer who rose to popularity during the ICO boom of 2017-2018. 

In a Twitter thread posted in response to the charges, Balina denied any wrongdoing and claimed that he made no gains off of the Sparkster deal. 

“The SEC's demand for disgorgement of ill-gotten gains makes no sense because Mr. Balina had no gains at all. [...] Mr. Balina did not receive compensation, and there is ZERO proof of said allegations. Nor did Mr. Balina profit from his purchase of Sparkster tokens. If anything, Mr. Balina is a potential victim of fraud and misrepresentation from the Sparkster team, like other investors.”

On Monday, the SEC announced that it had issued a cease-and-desist order against Sparkster Ltd. and its CEO, Sajjad Daya, “for the unregistered offer and sale of crypto asset securities from April 2018 through July 2018.”

As part of its settlement with the SEC, Sparkster has agreed to destroy its remaining crypto tokens and will pay a fine of $35 million that will be deposited into a fund for distribution to harmed investors. 


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