SEC v. Ian Balina, No. 1:22-CV-00950-DAE, Southern District of New York (May 23, 2024) — Judgment

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

U.S. SECURITIES AND EXCHANGE
COMMISSION,

                       Plaintiff,

vs.

IAN BALINA,

                       Defendant.
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No. 1:22-CV-00950-DAE

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT
  Before the Court are two Motions for Summary Judgment, one filed
by Plaintiff the United States Securities and Exchange Commission (the “SEC”)
(Dkt. # 33) and one filed by Defendant Ian Balina (Dkt. # 23).
  The Court conducted a hearing on May 9, 2024.  After careful
consideration of the evidence and the arguments set forth in the pleadings and
advanced by Counsel at the hearing, for the reasons that follow, the Court hereby
GRANTS IN PART and DENIES IN PART the SEC’s Motion for Summary
Judgment and DENIES Defendant Ian Balina’s Motion for Summary Judgment.

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BACKGROUND
  The SEC alleges that Sparkster, Ltd. (“Sparkster”), a software
development company located in the Cayman Islands, conducted an unregistered
securities offering of cryptocurrency (“crypto”) asset securities called SPRK
Tokens.  (Dkt. # 1 at 1.)  The SEC contends that the offering took place between
April and July 2018, raising approximately $30 million from nearly 4,000 investors
located abroad and in the United States.  (Id.)  The SEC required Sparkster to
disgorge the $3 million, imposed civil penalties, and set up a Fair Fund for the
benefit of persons harmed by the violations.
  This lawsuit, however, focuses on Defendant Ian Balina, a
cryptocurrency (“crypto”) investor and influencer.  (Dkt. # 1 at 1, App. 575.)   The
SEC alleges that Balina signed a contract to invest $5 million in the Sparkster
offering and sold, offered, and promoted SPRK Tokens, without disclosing
compensation, violating Section 5(a), 5(c), and 17(b) of the Securities Act.  (Id.
at   2.)
  Balina operated a Patreon account, a paid subscription platform.
(App. 41.)   On his Patreon, Balina stated that he has “come up with a methodology
of evaluating and grading” Initial Coin Offerings (“ICOs”) using data and prior
success.   (App. 571.)  By doing so, Balina was “trying to find undervalued ICOs

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that have the best chance of making money.”  (Id.)   He states that a spreadsheet
summing up his methodology has “gone viral.”  (Id.)
  Balina offered paid subscribers of his platform the opportunity to gain
access to Balina’s deal flow and his favorite ICOs before he shares them publicly.
(App. 571–72.)  He also gave options for those who could not afford a
subscription, stating that he will “always help out the little guys for free” on
YouTube live steams and his Telegram group.  (App. 572.)
  On May 4, 2018, Balina traveled abroad on a “World Tour” to try and
help the public identify “good projects from the fraudulent projects.”  (Dkt. # 7 at
2.)   During this world tour, Balina emceed a “Shark Tank like event”   in
Amsterdam (the “Event”) as part of this World Tour.  (Id.)  During the Event,
Balina introduced himself as a “blockchain angel investor . . . trying to find the
next big ICO[,]” and held a cryptocurrency pitch contest for ICO investment
opportunities.  (App. 351).
  Throughout the Event, Sparkster’s CEO, Sajjad Daya, pitched the
Sparkster platform and the SPRK Token.  (App. 354.)  Essentially, Daya explained
that there are “two parts” to Sparker’s technology.  First, there is the product that
allows users to “build software without writing any code.”  (App. 356.)  Daya
stated that this product was “finished” and “blockchain integrated.”  (Id.)  The
other part is the blockchain that runs on people’s computers as a decentralized

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cloud and can “earn tokens.”  (App. 357.)  Daya continued that Sparkster was
“going to hopefully run a public demonstration of [its] network” the following
month.  (App. 363.)  Daya pitched that Sparkster’s decentralized cloud achieves 10
million transactions per second (“TPS”).  (Id.)  However, when Balina asked, Daya
admitted that “right now” the TPS was really at “6-1/2 thousand TPS across six
cells,” and that they needed to add more cells to achieve linear growth.  (App.
362.)  Finally, Daya announced that he “built Sparkster to change the world” and
that he can only do that “with your support and the support of people like Ian[.]”
(App. 365.)
  After the contest, Balina and Daya began negotiating a contract for
Balina to purchase SPRK Tokens.  (App. 146.)  Balina originally asked Sparkster’s
CEO whether he could obtain a “5,000 ETH,” or approximately a $3,500,000
allocation of Tokens in a private sale.  (App. 146.)  Then, he increased the
allocation to $10 million because of the “level of interest in the project based on
talking to other investors or other people.”  (App. 70.)  Then, Daya countered with
a $5 million allocation, Balina accepted, and Daya responded, “Our pleasure.
We’re honored to have you onboard.”  (Id., App. 147)
  On May 20, 2018, nine days after the Event, Balina and Sparkster
memorialized their agreement in writing in the Simple Agreement for Future
Tokens (the “SAFT”)  .  (App 183.)  In the SAFT, it states Balina agreed to

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purchase 43,333,333 tokens at $0.15 a token and receive a   30% bonus.  (Id. at
183).  Balina, however, states in his affidavit that he only purchased 450,932.77
SPRK Tokens in exchange for 150 ETH, approximately $106,915.50.  (Dkt. # 23,
Ex. 1.)  He states that he paid the same price for each SPRK token as other
members of the pool and paid the same fees.  (Dkt # 23 at 23.)
  That same day, Balina introduced a “Sparkster Private Sale Whitelist”
on Telegram, his preferred messaging platform for Patreon subscribers, stating,
“Please fill out this form to get whitelisted for my Sparkster pool.”  (App. 48, 206).
Balina asked the subscribers to fill out a Google Form for investors to identify
personal information, how much they were willing to invest, and their Ethereum
wallet (“ETH”) that they intended to use for the sale.  (App. 206, App. 245).  The
Google Form also inquired about Patreon subscriber status, including “1 on 1 Tier”
or “Hangout Tier.”  (App. 247.)  Finally, the Google Form included the following
admonition:
THE ICOS IDENTIFIED HEREIN MAY CONSTITUTE SECURITIES
PURSUANT TO FEDERAL AND STATE SECURITIES LAWS AND
MAY NOT BE APPROPRIATE FOR, OR OFFERE[D]  TO, INVESTORS
RESIDING IN THE UNITED STATES. IN MAKING AN INVESTMENT
DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY ISSUING THE ICO
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS
AND RISKS INVOLVED.
INVESTMENT IN ICOS INVOLVES A HIGH DEGREE OF RISK AND
SHOULD BE CONSIDERED ON BY PERSONS WHO CAN AFFORD
TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT.

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  (App. 246.)
  On May 21, 2018, Balina announced the sale was live on his
Telegram chat for Patreon subscribers.  (App. 48, 206–07.)  Within the hour,
subscribers contributed to the pool using a PrimaBlock link provided by Balina and
thanked Balina for the opportunity to do so.  (App 206–227).  According to the
SEC’s expert, at least nine of these purchasers either self-identified as being
located in the United States or had an IP address from the United States.
(App. 276–78).  For the next few days, subscribers discussed the sale, and Balina
periodically chimed in.  (Id.)
  The PrimaBlock pool address was located on the Ethereum
blockchain.  (App. 280).  The address contains a smart contract that provides the
ability for Balina to direct administrative and operational activities of the pool.
(Id.)
  On May 26, 2018, Balina posted on Telegram: “Sending funds soon.
Those that want to pull please do so asap. We won’t wait long.”  (App. 237–39.)
He testified that he then initiated a transaction in the smart contract to send funds
from the pool to Sparkster.  (App. 142–43.)  He then updated the group that funds
were sent, and the Sparkster CEO thanked him for his contribution.  (App. 149,
239.)

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  Below is a diagram constructed by the SEC’s expert, Dr. Kogan,
explaining the transaction:

  (App. 281.)
  Balina included Sparkster on his “Hall of Fame” on his publicly
distributed website.  (Dkt # 23 at 1.)  In his post where he declared that Sparkster
was included on his “Hall of Fame” on his spreadsheet, Balina said that the crowd
voted for them to win the Amsterdam Event, and that he agrees.  (App. 87–88.)  In
a YouTube video, when discussing Sparkster, Balina stated, “our team basically
came to a conclusion that this was a project that we wanted to be a part of. Right?
So disclosure: I have invested. I was part of their token sale. Now, with that being

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said, this is not a paid endorsement.”  (App. 397.)  In multiple YouTube videos
over the next month, Balina emphasized that Sparkster was on his “Hall of Fame.”
(App. 324, 408–09, 412–13.)
  While still on his World Tour in June 2018, Balina declared to a
Budapest crowd that “Sparkster is, still right now . . . the best ICO of the month.”
(App. 408–09.)   He stated that he was “very bullish” on Sparkster.  (App 412.)  In
July 2018, Balina echoed these sentiments in Moscow and stated, “Sparkster is a
better investment” than Quarkchain and he was “pretty certain” Sparkster would be
profitable.  (App 412.)  Balina did, however, preface this opinion by claiming he
“was not paid off by Sparkster.”  (  App. 418.)
  The SEC alleges that Balina violated Sections 5(a), 5(c), and 17(b) of
the Securities Act.  (Id.)  In sum, the SEC alleges that Balina violated Section 5 by
selling and offering to sell unregistered securities through his offering of SPRK
Tokens through the pool.  (Id.)  The SEC further contends that Balina violated
Section 7 by agreeing to receive a 30% bonus from Sparkster on the tokens he
purchased in the Sparkster offering, while never disclosing the consideration he
received when promoting the token.  (Id.)  The SEC filed its Complaint against
Balina on September 19, 2022, seeking injunctive relief, disgorgement, civil
penalties, and other appropriate and necessary equitable relief.  (Id.)

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  On November 18, 2022, Balina filed his answer.  (Dkt. # 7.)  Balina
contends that he was fooled by Sparkster and, like the other members of the pool,
lost money after purchasing SPRK Tokens.  (Dkt. # 23 at 2.)  He also denies that
he received compensation from Sparkster, alleging that he simply received a
volume discount during a private pre-sale purchase, which is other purchasers
typically receive in the industry.  (Id. at 3.)
  The case was reassigned to the undersigned on April 21, 2023.
(Dkt. # 17.)  Balina filed a Motion for Summary Judgment on September 23, 2023.
(Dkt. # 23). The SEC responded on October 12, 2023. (Dkt. # 27).  Balina filed a
reply on October 23, 2023 (Dkt. #29).  The SEC filed their Cross Motion for
Partial Summary Judgment on November 21, 2023.  (Dkt. # 33).  Balina responded
on December 11, 2023.  (Dkt. # 36).  Then, the SEC filed a Reply on December 22,
2023.  (Dkt. # 38).  The SEC filed Notices of Supplemental Authority on March
12, 2024 and April 4, 2024.  (Dkts. ## 39, 41.)  The Court held a hearing on
May 9, 2024.
LEGAL STANDARDS
“Summary judgment is appropriate only if ‘there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.’”
Vann v. City of Southaven, 884 F.3d 307, 309 (5th Cir. 2018) (citations omitted);
see also Fed. R. Civ. P. 56(a).  “A genuine dispute of material fact exists when the

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‘evidence is such that a reasonable jury could return a verdict for the nonmoving
party.’”  Bennett v. Hartford Ins. Co. of Midwest, 890 F.3d 597, 604 (5th Cir.
2018) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)).  “The
moving party ‘bears the initial responsibility of informing the district court of the
basis for its motion, and identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material fact.’”  Nola Spice Designs,
LLC v. Haydel Enter., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
“Where the non-movant bears the burden of proof at trial, ‘the movant
may merely point to the absence of evidence and thereby shift to the non-movant
the burden of demonstrating . . . that there is an issue of material fact warranting
trial.’”  Kim v. Hospira, Inc., 709 F. App’x 287, 288 (5th Cir. 2018) (quoting Nola
Spice Designs, 783 F.3d at 536).  While the movant must demonstrate the absence
of a genuine issue of material fact, it does not need to negate the elements of the
nonmovant’s case.  Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017)
(quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1076 n.16 (5th Cir. 1994)).  A
fact is material if it “might affect the outcome of the suit.”  Thomas v. Tregre,
913 F.3d 458, 462 (5th Cir. 2019) (citing Anderson, 477 U.S. at 248).
“When the moving party has met its Rule 56(c) burden, the

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nonmoving party cannot survive a summary judgment motion by resting on the
mere allegations of its pleadings.”  Jones v. Anderson, 721 F. App’x 333, 335
(5th Cir. 2018) (quoting Duffie v. United States, 600 F.3d 362, 371 (5th Cir.
2010)).  The nonmovant must identify specific evidence in the record and articulate
how that evidence supports that party’s claim.  Infante v. Law Office of Joseph
Onwuteaka, P.C., 735 F. App’x 839, 843 (5th Cir. 2018) (quoting Willis v. Cleco
Corp., 749 F.3d 314, 317 (5th Cir. 2014)).  “This burden will not be satisfied by
‘some metaphysical doubt as to the material facts, by conclusory allegations, by
unsubstantiated assertions, or by only a scintilla of evidence.’”  McCarty v.
Hillstone Rest. Grp., Inc., 864 F.3d 354, 357 (5th Cir. 2017) (quoting Boudreaux v.
Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005)).  In deciding a summary
judgment motion, the court draws all reasonable inferences in the light most
favorable to the nonmoving party.  Wease v. Ocwen Loan Servicing, LLC,
915 F.3d 987, 992 (5th Cir. 2019).
Additionally, at the summary judgment stage, evidence need not be
authenticated or otherwise presented in an admissible form.  See Fed. R. Civ. P.
56(c); Lee v. Offshore Logistical & Transp., LLC, 859 F.3d 353, 355 (5th Cir.
2017).  However, “[u]nsubstantiated assertions, improbable inferences, and
unsupported speculation are not sufficient to defeat a motion for summary

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judgment.”  United States v. Renda Marine, Inc., 667 F.3d 651, 655 (5th Cir. 2012)
(quoting Brown v. City of Houston, 337 F.3d 539, 541 (5th Cir. 2003)).
ANALYSIS
  Balina and the SEC each ask the Court to decide several issues on
summary judgment.  First, Balina asked for this Court to find on summary
judgment that he did not violate Section 5 and Section 17 of the Securities Act
because SPRK Tokens are not a security and because the alleged promotions and
transactions occurred outside the United States.  Balina also argues that he did not
violate Section 5(a) and Section 5(c) of the Securities Act because he did not sell
SPRK tokens, and that he did not violate Section 17(b) because he did not agree to
accept any compensation for promotion of SPRK tickets.  Lastly, Balina argues
that he did not violate the Securities Act because any purported sales and offers to
sell are exempt under Section 4(a)(1) of the Securities Act.
  Conversely, the SEC argues that many of these issues can be decided
on summary judgment in the SEC’s favor.  The SEC contends that the SPRK
tokens are securities and that U.S. securities laws apply to Balina’s conduct
because he targeted U.S. investors on U.S. social media platforms.  Then, the SEC
avers that it established as a matter of law that Balina violated Section 5(a) and
Section 5(c) of the Securities Act.

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I. Application of the United States Securities Laws to Balina’s Conduct
 Balina argues the SEC is attempting to extend its jurisdiction
outside the United States.  (Dkt. # 23 at 2.)  Balina contends that the domestic
transactions test from Morrison v. National Australia Bank Ltd. forecloses the
SEC’s ability to exercise jurisdiction because no domestic transaction occurred.
(Id. at 8) (citing 561 U.S. 247 (2010)).
 In opposition, the SEC advances that the domestic transaction test
from Morrison does not apply because Morrison applies Section 10 of the
Exchange Act, an anti-fraud provision, as opposed to the registration (Section 5)
and promotions (Section 17) provisions of the Securities Act at issue here.
(Dkt. # 33 at 14.)  The SEC contends that instead, the Court should focus on the
fact that Balina used U.S. social media channels to target U.S. investors.  (Id.)
Alternatively, even if Morrison does apply, the SEC maintains a genuine issue of
material fact exists “as to whether Balina’s sales were domestic transactions.”
(Id. at   20).
 “It is a longstanding principle of American law ‘that legislation of
Congress, unless a contrary intent appears, is meant to apply only within the
territorial jurisdiction of the United States.’”  Morrison, 591 U.S. at 255 (quoting
EEOC v. Am. Oil. Co. (Amarco), 499 U.S. 244, 248 (1991), superseded by statute
on other grounds 42 U.S.C. § 2000e(f), as recognized in Arbaugh v. Y&H Corp.,

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549 U.S. 500 (2006)).  The crux of this presumption is that Congress’s grasp does
not extend beyond domestic matters.  See Microsoft Corp. v. AT&T Corp.,
550 U.S. 437, 454 (2007) (“United States law governs domestically but does not
rule the world . . . .”).  “When a statute gives no clear indication of an
extraterritorial application, it has none.”  Morrison, 561 U.S. at 255 (2010).  And
“extraterritorial application would be a craven watchdog indeed if it retreated to its
kennel whenever some domestic activity is involved in the case.”  Id.
 The Court must use a “two-step framework” to apply the
presumption against extraterritoriality.  Abitron Austria GmbH v. Hetronic Int'l,
Inc., 600 U.S. 412, 417 (2023).  At step one, the Court must determine whether a
provision is extraterritorial by evaluating whether “Congress has affirmatively and
unmistakably instructed that” the provision at issue should “apply to foreign
conduct.”  Id. at 417.  Neither party asserts that Congress has expressly provided
that the statutes here should apply extraterritorially.
 Therefore, the Court proceeds to step two, where it must determine
where the “conduct relevant to the statute’s focus occurred.”  Abitron Austria
GmbH, 600 U.S. 412, 419 (2023).  If the conduct relevant to the focus occurred in
the United States, then the statute may be applied domestically even if other
conduct occurred abroad.  Id.  However, if the relevant conduct occurred in another
country, then the case involves an impermissible extraterritorial application

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regardless of any other conduct that occurred in U.S. territory.  Id.  Therefore, the
Court must first determine what conduct occurred is relevant to the focus of the
Section 5(a), 5(c), and 17(b) of the Securities Act, and where it occurred.
 Balina contends that the Morrison domestic transaction test, should
govern our analysis of the relevant conduct.  The Morrison court held that there is
a   domestic application of Section 10(b) of the Exchange Act when (1) “the
purchase or sale is made in the United States” or (2) the transaction “involves a
security listed on a domestic exchange.”   Morrison, 591 U.S. at 269–70.  As the
SEC correctly points out, Morrison relies on the fact that Section 10(b) was
focused on sales of securities, rather than offers and promotions like Section 5 and
Section 17.  While Morrison’s    domestic transactions test may be properly applied
to determine where sales occurred for the purpose of Section 5, the same is not true
when the Court is determining where other conduct relevant to the focus of Section
5 and Section 17 occurred, like promotions and offers.  As the Supreme Court
stated, the “analysis applies at the level of the particular provision.”  Abitron, 600
U.S. at 419, n.3.  Section 5 and 17 also regulate offers and promotions, not just
completed transactions and sales.  Therefore, Morrison does not cabin this Court to
only find SEC’s jurisdiction when there is a purchase or sale made in the United
States or a security listed on the domestic exchange, as this is only the test for
location where relevant sales occur.  Therefore, to the extent the Court is

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determining whether sales occurred domestically, the Court will use the domestic
transaction test from Morrison.  See Sec. & Exch. Comm'n v. Ripple Labs, Inc.,
No. 20CIV10832ATSN, 2022 WL 762966, at *11 (S.D.N.Y. Mar. 11, 2022)
(finding that Morrison governs the domesticity of sales, but not offers, and
applying different tests for both).  But as to offers under Section 5(e) and
promotions under Section 17(b), the Court will look to other tests to determine the
conduct relevant to the focus of the statute.
 The court must examine the focus of congressional intent of a
statute to determine whether domestic conduct occurred.  Abitron, 600 U.S. at 418.
To make that determination, the court looks to the “object of the [statute’s]
solicitude, which can include the conduct it seeks to regulate, as well as the parties
and interests it seeks to protect or vindicate.”  Id. (internal citations omitted).
 Section 5(e) seeks to regulate offers in  the United States securities
market without proper registration, like standardized disclosures.  15 U.S.C.
§ 77e.4.  The Securities Act defines an “offer”   as “every attempt or offer to dispose
of, or solicitation of an offer to buy, a security or interest in a security, for value.”
Id. § 77b(1)(3).  The SEC’s own regulations expressly state that:
 “For the purposes only of section 5 of the Act (15 U.S.C. sec. 77e),
terms offer, offer to sell, sell, sale, and offer to buy shall be deemed to
include offers and sales that occur within the United States and shall be
deemed not to include offers and sales that occur outside the United States.”

 17 C.F.R. sec 230.901 (2020).

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 Other district courts have held that “offers” under the Security Act
have occurred where a person has either offered to dispose of securities in the
United States or solicited an offer to buy securities or security-based swaps in the
United States.  See Ripple Labs, Inc.,   2022 WL 762966, at *12; S.E.C. v. Goldman
Sachs & Co., 790 F. Supp. 2d 147, 165 (S.D.N.Y. 2011).  In S.E.C. v. Goldman
Sachs & Co, the Court relied on the offeror’s presence in the United States to find
that an offer occurred domestically, stating that phone calls made and emails sent
from New York City were enough to constitute a domestic offer.  Id.  Balina’s
location during the offers and promotions is debated, so there are not sufficient
facts for the Court to find as a matter of law that he was located in the United
States.
 However, the object at the focus of a statute does not only include
the conduct it seeks to regulate, but also those parties and interests that the statute
intends to protect.  Abitron, 600 U.S. at 418.  Balina used U.S. channels, like U.S.
social media networks, to target U.S. investors.  Section 5(e) seeks to protect
United States investors and United States financial markets from the offer of
unregistered securities.  So the Court must determine if the SEC can conclusively
establish that Balina targeted United States investors.
  Balina promoted SPRK Tokens on social media platforms, like
YouTube, X, Instagram, Discord, Telegram, Google, and his blog site, to sell

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SPRK tokens to United States investors.  (App. 29.)   All of these platforms are
available in the United States, and YouTube, X, Instagram, and Balina’s blog are
U.S. based platforms.  (Dkt. # 38, Ex. A.)  To market his Sparkster investment pool
to investors, Balina announced to the Sparkster Investment Pool Telegram Group
that “Sparkster Primablock is now live” and included a URL to contribute to the
investment pool using Primablock.  (App. 276.)   Primablock recorded certain
investors’ names, IP addresses, and physical addresses.  (Id.)  Four out of the 24
Sparkster Investment Pool participants listed their country as the United States, and
nine of the IP addresses were located in the United States.  (App. 277.)  Brian
Furano, a participant in Balina’s pool, was in Santa Monica, California when he
participated in the pool.  (App. 427–28; 432, 436–37.)  Marc Molinaro, another
participant in Balina’s pool, was located in the United States when he completed
the Google Form and transferred ETH to purchase SPRK Tokens from Balina’s
allocation.  (App. 604–05.)  Though the location of the majority of the investors is
unknown, the United States is the location of the largest share of investors from a
known country.
 Balina points to evidence of conduct related to the promotion, offer,
and sale of SPRK that occurred outside the United States.  For example, Sparkster
is a company incorporated in the Cayman Islands.  (Dkt. # 36, Ex. 2 at 156.)
Balina also declared that the offering by Sparker was in the United Kingdom and

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that PrimaBlock is a company registered under the laws of Estonia.  (Dkt. # 36,
Ex. 2 at 4.)  Lastly, the “Shark Tank” like event at which Balina participated
occurred in Amsterdam.  (App. 349.)
 Nonetheless, the SEC contends that the ties to United States here
are sufficient to show that Balina purposefully targeted United States investors,
and the Court agrees.  Unfortunately, many elements of crypto transactions, like
the identity and location of the purchasers, are characterized by anonymity.
However, due to Balina’s use of United States social media platforms, along with
the larger share of United States pool investors compared to other known countries,
the Court finds that the SEC conclusively established that Section 5(e) may apply
to Balina’s offers under the Securities Act.
 Section 17 prohibits the use of instruments of communication in
interstate commerce to promote securities in the United States without disclosing
the amount of consideration received for that promotion.  15 U.S.C. § 77q(b)
(emphasis added).  For the same reasons listed above, Balina’s promotions that
used platforms available in the United States to reach Unites States investors is
sufficient to show domestic conduct under Section 17(b).
  Lastly, as it relates to the sales of securities under Section 5(a), the
Court will apply the Morrison test.  Morrison held that Section 10(b) can be
applied to domestic purchases and sales.  However, Morrison did not define what

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constitutes a domestic sale, and neither has the Fifth Circuit.  Balina argues that
this Court should adopt the standard articulated by the Second Circuit in Absolute
Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012).  There,
the Second Circuit stated that “to sufficiently allege a domestic securities
transaction in securities not listed on a domestic exchange . . . a plaintiff must
allege facts suggesting that irrevocable liability was incurred or title was
transferred within the United States.”
  Absolute Activist Value Master Fund Ltd. v.
Ficeto, 677 F.3d 60, 68 (2d Cir. 2012).
 Both Balina and the SEC argue that the “irrevocable liability” test
supports their arguments.  Balina argues that because he was outside the United
States from prior to May 4, 2018 until July 18, 2018, and that all his alleged
promotions occurred at locations outside the United States.  Therefore, he argues,
liability did not attach in the United States.
   On the other hand, the SEC argues that the transactions here are
domestic even under the Absolute Activist standard because some of Balina’s
investors were in the United States when they committed to purchase SPRK Token
through Balina’s investment pool.  (Dkt. # 33 at 25.)  Courts in the Second and
Tenth circuit have found that a domestic transaction occurs when either the seller
or the buyer is present in the United States.  Williams v. Binance, No. 22-972,
2024 WL 995568, at *140 (2d Cir. Mar. 8, 2024) (stating that when Plaintiffs sent

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buy orders and payments on the Binance platform, they “irrevocably committed”
to the investments while in the United States); SEC v. Traffic Monsoon, LLC, 245
F. Supp. 3d 1275, 1295 (D. Utah 2017) (“Either a domestic purchaser or a
domestic seller of a security may bring a transaction within the purview of” the
U.S. securities laws), aff'd sub nom. SEC v. Scoville, 913 F.3d 1204 (10th Cir.
2019).   Here, even if Balina and the relevant companies are technically located
outside the United States, many of the “buyers” in Balina’s pool were in the United
States when they opted-in to the Sparkster pool.
 Balina also asks the Court to use the test advanced by the Second
Circuit in Parkcentral Glob. HUB Ltd. v. Porsche Auto. Holdings SE, 763 F.3d
198, 216 (2d Cir. 2014).  There, the Second Circuit held that a “domestic
transaction is necessary but not necessarily sufficient to make § 10(b) applicable.”
Id.  Rather, the claims may be dismissed as extraterritorial when they are “so
predominantly foreign as to be impermissibly extraterritorial.”  Id.   Balina noted
that a court in this district cited Parkcentral approvingly in Eng v. AKRA Agric.
Partners, Inc., 2017 WL 5473481 (W.D. Tex. Aug. 9, 2017).  However, since Eng
was decided, many other courts have declined to follow Parkcentral, stating that it
is inconsistent with Morrison.  SEC v. Morrone, 997 F.3d 52, 60 (1st Cir. 2021)
(“[W]e reject Parkcentral as inconsistent with Morrison.”); Stoyas v. Toshiba
Corp., 896 F.3d 933, 950 (9th Cir. 2018) (“[T]he principal reason we should not

22

follow the Parkcentral decision is    because it is contrary to Section 10(b) and
Morrison itself.”); In re Volkswagen AG Sec. Litig., 2023 WL 2505539, at *10-11
(E.D. Va. Mar. 14, 2023) (rejecting Parkcentral as inconsistent with Morrison).
Therefore, the Court will not rely on Parkcentral here.
 The Court also notes that finding that a domestic transaction
occurred here is consistent with public policy.  If Balina could evade the SEC’s
lawsuit simply because he was located outside the United States while promoting
crypto investments to United States investors on United States social media
platforms, then others could follow in his footsteps in the future, by temporarily
leaving the United States, to evade United States securities regulations while
targeting United States investors and United Sates financial markets.
 Accordingly, the Court finds Balina’s broader challenge to
domesticity fails.  Section 5(a), 5(c), and 17(b) of the Securities Act apply to
Balina’s conduct in this case as a matter of law.
II. Whether the SPRK Tokens are Securities
 Balina argues that this Court should grant summary judgment in his
favor because the SPRK Tokens are not securities and therefore not subject to the
SEC’s jurisdiction.  (Dkt. # 23 at 10.)  The SEC, on the other hand, argues that the
Court should grant summary judgment because the SPRK Tokens were offered and
sold as securities.  (Dkt. # 33 at 2.)  Therefore, a threshold issue common to both

23

the SEC’s Section 5 and Section 7 claims is whether SPRK Tokens were offered
and sold as securities.
 Under the Securities Act, the term “security” includes any
“investment contract.”  15 U.S. C. §77b(a)(1).  The Supreme Court’s decision in
SEC v. Howey, 328 U.S. 293 (1946) defines “an investment contract”   as “(1) an
investment of money; (2) in a common enterprise; and (3) on an expectation of
profits to be derived solely from the efforts of individuals other than the investor.”
SEC v. Sethi, 910 F.3d 198, 203 (5th Cir. 2018) (citing Williamson v. Tucker, 645
F.2d 401, 417–18 (5th Cir. 1981).
 The Howey test embodies a “flexible rather than static principle,
one that is capable of adaptation to meet the countless and variable schemes
devised by those who seek the use of the money of others on the promise of
profits.”  Howey, 328 U.S. at 299.  Ultimately, there is sufficient evidence to show
that Sparkster sought money from investors, through the purchase of SPRK
Tokens, on the promise of development of Sparkster and an increased value of the
investment. The Court will analyze each prong in turn.
A. Investment of Money
 The first prong of the definition is clearly satisfied.  The SPRK
Token purchasers paid for their tokens using a crypto asset known as Ethereum in
exchange for SPRK Tokens.  (App. 594.)   The investment of crypto assets is

24

equivalent to an investment of money.  SEC v. Shavers, No. 4:13–CV–416, 2013
WL 4028182, at *2 (E.D. Tex. Aug. 6, 2013) (holding that use of Bitcoin was an
investment of money).
B. Common Enterprise
 For the second prong, the Court must consider whether there is a
“common enterprise.” S.E.C. v. Koscot Interplanetary, Inc., 497 F.2d 473, 478 (5th
Cir. 1974).  A common enterprise is “one in which the fortunes of the investor are
interwoven with and dependent upon the efforts and success of those seeking the
investment or of third parties.”  Id.  This prong focuses on the “uniformity of
impact of the promoter’s efforts.”  Id.  A common enterprise can be “evidenced by
the fact that fortunes of all investors are inextricably tied to the efficacy” of the
party seeking the investment.  Id. at 479.  Additionally, the Fifth Circuit has stated
that the critical inquiry is confined to “whether the fortuity of the investments
collectively is essentially dependent upon promoter expertise.”  Long v. Shultz
Cattle Co., Inc., 881 F.2d 129, 140 (5th Cir. 1989) (citing Sec. & Exch. Comm'n v.
Cont'l Commodities Corp., 497 F.2d 516 (5th Cir. 1974)).
 In the context of cryptocurrency, other district courts have held that
the nature of a common enterprise is one that pools invested proceeds, in an effort
to create an ecosystem for the token, and thus boost the value of the investment.
See, e.g., U.S. Sec. & Exch. Comm'n v. Kik Interactive Inc., 492 F. Supp. 3d 169,

25

179 (S.D.N.Y. 2020).
 Sparkster promised to use the funds from the sale of the SPRK
Tokens to develop and promote the digital ecosystem it created, establishing a
common enterprise.  Sparkster stated in its Whitepaper that “[t]he development and
launch of the Sparkster Platform by Sparkster Enterprise Ltd will be funded by the
Company using the proceeds of the sale of the Tokens.”  (App. 442.)  In a
June 1, 2018, YouTube presentation, when asked what Sparkster would do with the
money it raised, Sparkster’s CEO answered, “Vast majority of money we’ve raised
will be used to promote Sparkster and tell the world about Sparkster.”  (App. 532.)

Daya also emphasized how the Sparkster platform was continuing to grow and
increase in transaction per second (“TPS”) speed.  (See App. 362.)  The evidence
shows that Sparkster was asking the purchasers of its tokens to make a bet on the
success of Sparkster by soliciting investments through token purchases, key
features of a common enterprise.  See SEC v. Kik Interactive Inc., 492 F.Supp.3d
169 (S.D.N.Y. 2020) (holding that Kik’s use of funds from its issuance of tokens to
develop and construct its digital ecosystem established a common enterprise);  SEC
v. Telegram Grp. Inc., 448 F.Supp.3d 352, 369 (S.D.N.Y. 2020) (finding a
common enterprise where “[t]he ability to each Initial Purchaser to profit was
entirely dependent on the successful launch” of the blockchain).
 Other facts indicate that Sparkster was seeking purchasers of tokens

26

much like a company would seek investors before an I.P.O.  Sparkster highlighted
the company’s current and upcoming partnerships.  (App. 400.)  The Whitepaper
contained eight pages of biographies of executives and other employees,
highlighting their educational and professional backgrounds.  (App. 497–505.)
Essentially, Sparkster was highlighting the “promoter expertise” to give comfort to
the investors about the “fortuity of the investments,” supporting a common
enterprise.  See Long v. Shultz Cattle Co., Inc., 881 F.2d 129, 140 (5th Cir. 1989).
  Balina argues that the “common enterprise” prong is not met
because the SPRK Tokens did not entitle or grant its owner (1) any shares of stock
in Sparkster (or any other company); (2) any voting rights; (3) any rights to a
dividend or other profit share; or (4) any other financial rights.  (See Dkt. # 23,
Ex.4 at 34-47).  Balina argues that to find a common enterprise under Howey, the
Court must find that the investors share in the profits of the company.
 No Fifth Circuit case requires that an investor own a stock or rights
in a company for an investment contract to exist.  In fact, the Fifth Circuit has
stated that the common enterprise prong does not require “interdependence
narrowly in terms of shared profits or losses.”  Long, 881 F.2d at 141.  “Rather, the
necessary interdependence may be demonstrated by the investors' collective
reliance on the promoter's expertise.”  Id.  Here, the investors relied on Sparkster’s
expertise and technical skill to develop the underlying software and blockchain

27

technology, engaging in a common enterprise that correlated with the success of
the promoter.  This is evidenced by Sparkster’s promotion of the credentials of its
management and constant assurance that the underlying software technology was
in the process of improving, and even capable of changing the world.  (See App.
354–63.)
C. Expectation of Profits Derived From Efforts of Promoter or Third Party
 For the third prong, the court must analyze whether the investment
contract is one in which the investor is “led to expect profits solely from the efforts
of the promoter or a third party.”  Howey, 328 U.S. at 298-99; see also S.E.C. v.
Koscot Interplanetary, Inc., 497 F.2d 473, 483 (5th Cir. 1974).  The word “solely”
has not been construed literally.  Long, 881 F.2d at 133.  Instead, the “critical
inquiry” is instead “whether the efforts made by those other than the investor are
the undeniably significant ones, those essential managerial efforts which affect the
failure or success of the enterprise.”  Id. (citing Williamson, 645 F.2d at 418).  Out
of circuit district courts have found that this prong is satisfied in the context of
other crypto tokens in similar circumstances.  See SEC v. Terraform Labs Pte.
Ltd., No. 23-cv-1346, 2023 WL 4858299, at *1 (S.D.N.Y. July 31, 2023)
(determining the “reasonable expectation of profits” prong to be satisfied because
an objective investor would have perceived defendants’ statements and actions
promising to use the funds from the sale of tokens to continue to improve the

28

underlying ecosystem as indicating the possibility of profitable returns); SEC v.
Coinbase, Inc., 23-cv  -4738, 2024 WL 1304037, at *20 (S.D.N.Y. Mar. 27, 2024).
 Balina principally argues that this prong could not be satisfied
because Balina and other investors were buying a “finished product.”  (Dkt. # 23 at
11–13.)   Balina points out that Sparkster’s CEO stated there was a finished
product at the Amsterdam Event and marketed the SPRK Tokens as the means by
which an individual could use the finished product.  Essentially, Balina contends
that the token is more like a commodity that may increase in value, but that
increase in value would not be dependent on the continuing efforts of the promoter.
(Dkt. # 23 at 17.)
 In support of this argument, Balina also points the Court to the
SEC’s guidance on the topic that was available in 2018.  In 2018, Chairman Jay
Clayton made a statement on cryptocurrencies and initial coin offerings,
emphasizing that whether a token is a security varies on a case-by-case basis.  SEC
Chairman Jay Clayton, “Statement on Cryptocurrencies and Initial Coin
Offerings,” Dec. 11, 2017, https://www.sec.gov/news/public-statement/statement-
clayton-2017-12-11.  To distinguish, the SEC Chairman drew an example:
 For example, a token that represents a participation interest in a
book-of-the-month club may not implicate our securities laws, and may well
be an efficient way for the club’s operators to fund the future acquisition of
books and facilitate the distribution of those books to token holders. In
contrast, many token offerings appear to have gone beyond this construct
and are more analogous to interests in a yet-to-be-built publishing house

29

with the authors, books and distribution networks all to come.

 Id.
  SPRK’s Token is more like the “yet-to-be-built publishing house.”
The Sparkster CEO admitted that the underlying technology had not reached its
peak speeds, stating that the TPS was really at “6-1/2 thousand TPS across 6 cells”
and that they needed to add more cells to achieve linear growth.  In fact, the
Whitepaper had a section titled “The Road to 10 Million+ TPS.”  (App. 478.)  The
Sparkster CEO admitted that Sparkster would use the proceeds from the sale of
SPRK tokens to market and grow the business.  (App. 442.)  He also announced
that he “built Sparkster to change the world” and that he can only do that with the
support of investors and people like Ian.  (App. 365.)  Essentially, the tokens were
a vehicle for Sparkster to finance its company as investors bet on the underlying
technology.  If the investors did not trust Sparkster’s CEO to grow the platform
and improve the technology, the SPRK tokens would be worthless.  This is why
the Sparkster CEO highlighted the backgrounds and prestige of the management of
the company.  Though the Court recognizes that the SEC’s guidance is not binding,
the Court finds that Balina is incorrect that the SPRK token represents a “finished
product.”
 Balina argues that the SAFT and Whitepaper characterize the token
as a finished product that can only be used within the Sparkster ecosystem.

30

(Dkt. # 36 at 5.)  However, when a Court analyzes whether something is a security,
the Court will look to substance over form. Tcherepnin v. Knight, 389 U.S. 332,
336 (1967).  Therefore, the Court will not consider express disclaimers in a
contract when determining the character of the security. See SEC v. C.M. Joiner
Leasing Corp., 320 U.S. 344, 352–55 (1943) (courts consider may look “outside
the instrument itself” to consider the character of an instrument).
 For the reasons stated above, and because the SPRK tokens meet
all three prongs of the Howey test, the Court holds that the SPRK tokens are
securities as a matter of law.
III. Violation of Section 17(b) under the Act
 Balina asks the Court to dismiss the SEC’s claim under Section
17(b) of the Securities Act on summary judgment.  He argues that he “never
accepted and never agreed to accept any compensation for allegedly promoting
SPRK tokens.”  (Dkt. # 23 at 3.)  He contends his involvement was merely a bulk
purchaser and he gained the same advantage as other pool purchasers.  (Id. at 3–5).
In support, he directs the Court to redacted portions of the deposition of a fellow
SPRK investor, Brian Furano.  (Id. at   5).

 The SEC maintains that Balina received a significantly larger
amount than the other members in the pool.  Namely, the SEC purports Balina was
able to purchase $5 million worth of tokens, wheares others were not allowed to

31

invest more than the minimum.  (Dkt. # 24 at 2.)
 Section 17(b) of the Act reads:
It shall be unlawful for any person, by the use of any means or
instruments of transportation or communication in interstate
commerce or by use of the mails, to publish, give publicity to, or
circulate any notice, circular, advertisement, newspaper, article, letter,
investment service, or communication which, though not purporting to
offer a security for sale describes such security for a consideration
received or to be received, directly or indirectly, from an issuer,

underwriter, or dealer, without fully disclosing the receipt, whether
past or prospective, of such consideration and the amount thereof.

 15 U.S.C. § 77q(b).
 It is obvious that Balina promoted Sparkster.  He included
Sparkster on his “Hall of Fame” list and repeatedly spoke favorably of a
Sparkster investment on his World Tour.  However, promotion alone is not
sufficient to constitute a violation of Section 17(b).  Balina must also have
“directly or indirectly,” received, consideration and failed to disclose this
consideration.  Id.
 Balina constantly denied that he was being compensated for
his promotion of Sparkster.  He stated that he was not getting paid off by
Sparkster and that he was not being compensated.  (App 397, 481.)  Balina
claims he simply thought it was a good product and disclosed his opinion to
the public, much like he did not for other crypto projects.  (Dkt. # 23 at 4.)
Therefore, it is also obvious that he did not disclose he was being

32

compensated.  The only issue remaining is whether Balina was actually
compensated for his promotions.
 Balina states in his affidavit that he simply received the same
volume discount of 30% as every other purchaser in the pool.  (Dkt. # 23,
Ex. 1.)  He further states that the discount was not conditioned on Balina’s
promotion of Sparkster or its tokens.  (Id.)  Lastly, he claims that he did not
have the opportunity to purchase more tokens than any other investor.  (Id.)
 The SEC, however, points to evidence that Balina received
certain benefits that other investors and the general public did not receive.
The SAFT states that Balina is the purchaser, and that he may purchase an
amount of $10 million for 43,333,333 Tokens.  (App. 183.)   Sparkster’s
CEO told Balina that everyone else’s contribution had been capped, but
Balina was allowed to invest above the minimum.  (App. 148) (“You’re the
only one that’s been allowed to invest more than the min.”)
 Regarding the bonus, Sparkster’s CEO explicitly stated that
Balina would receive a 30% bonus, and that there would be “no bonus” for
“everyone else.”  (App. 148.)   Balina acknowledged that he may “have to
publicly disclose it to [his audience] due to SEC regulations.”  (Id.)
 After the SAFT was executed, Balina added Sparkster to his
Hall of Fame and continued to promote Sparkster around the world over the

33

next few months.  (App. 147, 397, 408.)  The conversations between Daya
and Balina also indicate that there possibly could have been a prior
conversation and understanding regarding a bonus and allocation to Balina
in exchange for a spot in the Amsterdam event.  For example, Balina told
Daya, “Hey Etienne is telling me he’s not getting an allocation even though
he’s the one who helped you get into the pitch contest.”  (App. 148.)
 If, however, Balina is correct that he did not actually receive
compensation for his promotion, but rather the same bonus and allocation
cap as everyone else, then a violation of Section 17(b) cannot be shown.
Ultimately, the Court finds that there is a fact issue regarding the discount
other members of the pool received, if any, whether there was a prior
agreement for compensation in exchange for promotion, and whether Balina
was given the opportunity to purchase more shares than other members of
the Pool. There are inconsistencies between Balina’s affidavit, the
WhatsApp messages between Balina and Daya, and the SAFT.  Therefore,
there is an issue of material fact regarding the existence of a quid pro quo,
and the Court declines to decide this issue on summary judgment.
IV. Violations of Section 5 under the Act
 The SEC argues that Balina violated Section 5(a) and 5(c) of
the Securities Act as a matter of law.  Conversely, Balina argues that it is

34

conclusively established that Balina did not sell or offer to sell SPRK
Tokens.  Therefore, both parties ask this Court to decide this issue on
summary judgment.
 To establish a Section 5 violation, the SEC must prove: “(1)
[N]o registration statement was in effect as to the securities, (2) the
defendant sold or offered to sell these securities, and (3) interstate
transportation or communication and the mails were used in connection with
the sale or offer of sale.”  SEC v. Cont’l Tobacco Co. of South Carolina, 463
F.2d 137, 155 (5th Cir.1972).  Neither party asserts that Balina registered the
security, so the first element is clearly met.
 The parties dispute the second element. Balina contends that
he did not sell or offer to sell SPRK tokens, but rather, he was a member of a
pool of numerous individuals who purchased SPRK tokens.  (Dkt. # 23 at 6.)
Balina highlights that he did not receive a commission for such sales and
that other pool members purchased their SPRK tokens on the same price and
paid the same fees.  (Id.)  He asserts the pool members did not purchase their
tokens from him, and that the SEC cannot point to evidence that anyone
purchased SPRK tokens from Balina himself.
 The SEC, on the other hand, points to evidence showing that
Balina sold the securities. Balina signed a $5 million contract with Sparkster

35

to buy 43,333,333 SPRK Tokens.  (App. 183.)  The same day that he signed
the contract, Balina posted in a Telegram invitation to “fill out [link to
Google form] to get whitelisted for my Sparkster pool. It will be starting one
day.”   (App. 48, 206.)  The next day, he went live and told his supporters to
contribute.  (Id.)  Balina told the members that he was sending their
contributions to Sparkster, notifying them when the funds were sent.
(App. 149, 239.)  Balina sent the pool funds to Sparkster with the smart
contract at PrimaBlock.  (App. 142.)  Sparkster’s CEO thanked Balina when
he received the funds.  (App. 149.)  Then, the smart contract for the pool
distributed the tokens to investors after they were received from Sparkster.
(App. 256, 285.)
 Balina possessed title to the tokens under the SAFT. The
SEC’s expert stated that Balina actually received 690,471.1 tokens, which is
much less than the amount stated in the SAFT.  (App 285.)  However, the
SAFT still represents the fact that Balina is the “purchaser” of 433,333,333
Tokens.  (App. 183, 189.)  Then, Balina allowed his paid subscribers an
allocation of the Tokens he bought through the SAFT by allowing the
subscribers to buy SPRK Tokens from his pool that he had control over.
 Balina’s reliance on the lack of commission he received for
the sale is also irrelevant.  First, Balina cites no case to support the

36

contention that a commission is needed to show a sale under Section 5.
More importantly, Balina states that a lack of commission is relevant
because it shows that Balina would have no incentive to sell the Tokens at
the same price that he bought them.  However, Balina would have an
incentive for selling the tokens—increased liquidity and value of the token
due to an increase in investors.
 In sum, Balina’s actions show that he violated Section 5(a)
and Section 5(c) of the Securities Act by selling SPRK, an unregistered
security, to investors through his pool of SPRK tokens.
V. Whether Balina is Exempt from Liability under Section 4(a)(1) of
the Securities Act
 Under Section 4(a)(1) of the Securities Act, exempt
transactions include “transactions by any person other than an issuer,
underwriter, or dealer.”  15 U.S.C. § 77d(a)(1).  Balina claims that because
he is not an issuer, underwriter, or dealer, he cannot be held liable for
violations of the Securities Act.
 Under Section 2(a)(11), an “underwriter” is “any person who
has purchased from an issuer with a view to, or offers or sells for an issuer in
connection with, the distribution of any security, or participates or has a
direct or indirect participation in any such undertaking...”  15 U.S.C.
§ 77b(a)(11).

37

 By offering SPRK Tokens through his pool, Balina acted as
an underwriter, purchasing SPRK Tokens from Sparkster’s distribution to
sell to members of his pool.  He formed the pool the same day he signed the
SAFT, indicating his intent to distribute the tokens immediately.  (App.
183.)  He also asked to receive more SPRK Tokens from Sparkster due to
the amount of investor interest.  (App. 70.)  These facts show that he
purchased the tokens from Sparkster with the intent to distribute the tokens.
Therefore, Balina is not exempt under this provision.  See Vohs v. Dickson,
495 F.2d 607, 620 (5th Cir. 1974) (holding that an underwriter is a purchaser
with a view to a public offering of a security).
CONCLUSION

  For these reasons, the Court GRANTS IN PART AND DENIES IN
PART Plaintiff’s Motion for Summary Judgment and DENIES Defendant’s
Motions for Summary Judgment.  The Court holds as a matter of law that U.S.
securities laws apply to Balina’s conduct and that the SPRK tokens are securities.
The Court also holds as a matter of law that Balina violated Section 5(a) and 5(c)
of the Securities Act.  The Court denies Defendant’s motion for summary
judgment on the SEC’s Section 17 claim, which shall survive and not be decided as
a matter of law.

38

  DATED: Austin, Texas, May 22, 2024.

______________________________________

David Alan Ezra
Senior United States District Judge

IN THE UNITED STATES DISTRICT COURT 
FOR THE WESTERN DISTRICT OF TEXAS 

AUSTIN DIVISION 
 
U.S. SECURITIES AND EXCHANGE 
COMMISSION, 
 
                       Plaintiff, 
 
vs. 
 
IAN BALINA,  
 
                       Defendant. 
________________________________ 

§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§  

No. 1:22-CV-00950-DAE 
 
 
 
 
  

 
ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT 

  Before the Court are two Motions for Summary Judgment, one filed 

by Plaintiff the United States Securities and Exchange Commission (the “SEC”) 

(Dkt. # 33) and one filed by Defendant Ian Balina (Dkt. # 23).   

  The Court conducted a hearing on May 9, 2024.  After careful 

consideration of the evidence and the arguments set forth in the pleadings and 

advanced by Counsel at the hearing, for the reasons that follow, the Court hereby 

GRANTS IN PART and DENIES IN PART the SEC’s Motion for Summary 

Judgment and DENIES Defendant Ian Balina’s Motion for Summary Judgment.  

 

 

 

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2 
 

BACKGROUND 

  The SEC alleges that Sparkster, Ltd. (“Sparkster”), a software 

development company located in the Cayman Islands, conducted an unregistered 

securities offering of cryptocurrency (“crypto”) asset securities called SPRK 

Tokens.  (Dkt. # 1 at 1.)  The SEC contends that the offering took place between 

April and July 2018, raising approximately $30 million from nearly 4,000 investors 

located abroad and in the United States.  (Id.)  The SEC required Sparkster to 

disgorge the $3 million, imposed civil penalties, and set up a Fair Fund for the 

benefit of persons harmed by the violations.   

  This lawsuit, however, focuses on Defendant Ian Balina, a 

cryptocurrency (“crypto”) investor and influencer.  (Dkt. # 1 at 1, App. 575.)  The 

SEC alleges that Balina signed a contract to invest $5 million in the Sparkster 

offering and sold, offered, and promoted SPRK Tokens, without disclosing 

compensation, violating Section 5(a), 5(c), and 17(b) of the Securities Act.  (Id. 

at 2.)  

  Balina operated a Patreon account, a paid subscription platform.  

(App. 41.)  On his Patreon, Balina stated that he has “come up with a methodology 

of evaluating and grading” Initial Coin Offerings (“ICOs”) using data and prior 

success.   (App. 571.)  By doing so, Balina was “trying to find undervalued ICOs 

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3 
 

that have the best chance of making money.”  (Id.)  He states that a spreadsheet 

summing up his methodology has “gone viral.”  (Id.)  

  Balina offered paid subscribers of his platform the opportunity to gain 

access to Balina’s deal flow and his favorite ICOs before he shares them publicly.  

(App. 571–72.)  He also gave options for those who could not afford a 

subscription, stating that he will “always help out the little guys for free” on 

YouTube live steams and his Telegram group.  (App. 572.)   

  On May 4, 2018, Balina traveled abroad on a “World Tour” to try and 

help the public identify “good projects from the fraudulent projects.”  (Dkt. # 7 at 

2.)   During this world tour, Balina emceed a “Shark Tank like event” in 

Amsterdam (the “Event”) as part of this World Tour.  (Id.)  During the Event, 

Balina introduced himself as a “blockchain angel investor . . . trying to find the 

next big ICO[,]” and held a cryptocurrency pitch contest for ICO investment 

opportunities.  (App. 351).   

  Throughout the Event, Sparkster’s CEO, Sajjad Daya, pitched the 

Sparkster platform and the SPRK Token.  (App. 354.)  Essentially, Daya explained 

that there are “two parts” to Sparker’s technology.  First, there is the product that 

allows users to “build software without writing any code.”  (App. 356.)  Daya 

stated that this product was “finished” and “blockchain integrated.”  (Id.)  The 

other part is the blockchain that runs on people’s computers as a decentralized 

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4 
 

cloud and can “earn tokens.”  (App. 357.)  Daya continued that Sparkster was 

“going to hopefully run a public demonstration of [its] network” the following 

month.  (App. 363.)  Daya pitched that Sparkster’s decentralized cloud achieves 10 

million transactions per second (“TPS”).  (Id.)  However, when Balina asked, Daya 

admitted that “right now” the TPS was really at “6-1/2 thousand TPS across six 

cells,” and that they needed to add more cells to achieve linear growth.  (App. 

362.)  Finally, Daya announced that he “built Sparkster to change the world” and 

that he can only do that “with your support and the support of people like Ian[.]”  

(App. 365.)    

  After the contest, Balina and Daya began negotiating a contract for 

Balina to purchase SPRK Tokens.  (App. 146.)  Balina originally asked Sparkster’s 

CEO whether he could obtain a “5,000 ETH,” or approximately a $3,500,000 

allocation of Tokens in a private sale.  (App. 146.)  Then, he increased the 

allocation to $10 million because of the “level of interest in the project based on 

talking to other investors or other people.”  (App. 70.)  Then, Daya countered with 

a $5 million allocation, Balina accepted, and Daya responded, “Our pleasure.  

We’re honored to have you onboard.”  (Id., App. 147) 

  On May 20, 2018, nine days after the Event, Balina and Sparkster 

memorialized their agreement in writing in the Simple Agreement for Future 

Tokens (the “SAFT”).  (App 183.)  In the SAFT, it states Balina agreed to 

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5 
 

purchase 43,333,333 tokens at $0.15 a token and receive a 30% bonus.  (Id. at 

183).  Balina, however, states in his affidavit that he only purchased 450,932.77 

SPRK Tokens in exchange for 150 ETH, approximately $106,915.50.  (Dkt. # 23, 

Ex. 1.)  He states that he paid the same price for each SPRK token as other 

members of the pool and paid the same fees.  (Dkt # 23 at 23.)  

  That same day, Balina introduced a “Sparkster Private Sale Whitelist” 

on Telegram, his preferred messaging platform for Patreon subscribers, stating, 

“Please fill out this form to get whitelisted for my Sparkster pool.”  (App. 48, 206).  

Balina asked the subscribers to fill out a Google Form for investors to identify 

personal information, how much they were willing to invest, and their Ethereum 

wallet (“ETH”) that they intended to use for the sale.  (App. 206, App. 245).  The 

Google Form also inquired about Patreon subscriber status, including “1 on 1 Tier” 

or “Hangout Tier.”  (App. 247.)  Finally, the Google Form included the following 

admonition: 

THE ICOS IDENTIFIED HEREIN MAY CONSTITUTE SECURITIES 
PURSUANT TO FEDERAL AND STATE SECURITIES LAWS AND 
MAY NOT BE APPROPRIATE FOR, OR OFFERE[D] TO, INVESTORS 
RESIDING IN THE UNITED STATES. IN MAKING AN INVESTMENT 
DECISION, INVESTORS MUST RELY ON THEIR OWN 
EXAMINATION OF THE PERSON OR ENTITY ISSUING THE ICO 
AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS 
AND RISKS INVOLVED. 
INVESTMENT IN ICOS INVOLVES A HIGH DEGREE OF RISK AND 
SHOULD BE CONSIDERED ON BY PERSONS WHO CAN AFFORD 
TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. 
 

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  (App. 246.)  

  On May 21, 2018, Balina announced the sale was live on his 

Telegram chat for Patreon subscribers.  (App. 48, 206–07.)  Within the hour, 

subscribers contributed to the pool using a PrimaBlock link provided by Balina and 

thanked Balina for the opportunity to do so.  (App 206–227).  According to the 

SEC’s expert, at least nine of these purchasers either self-identified as being 

located in the United States or had an IP address from the United States.  

(App. 276–78).  For the next few days, subscribers discussed the sale, and Balina 

periodically chimed in.  (Id.) 

  The PrimaBlock pool address was located on the Ethereum 

blockchain.  (App. 280).  The address contains a smart contract that provides the 

ability for Balina to direct administrative and operational activities of the pool.  

(Id.)  

  On May 26, 2018, Balina posted on Telegram: “Sending funds soon. 

Those that want to pull please do so asap. We won’t wait long.”  (App. 237–39.)  

He testified that he then initiated a transaction in the smart contract to send funds 

from the pool to Sparkster.  (App. 142–43.)  He then updated the group that funds 

were sent, and the Sparkster CEO thanked him for his contribution.  (App. 149, 

239.)   

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  Below is a diagram constructed by the SEC’s expert, Dr. Kogan, 

explaining the transaction: 

 

  (App. 281.)  

  Balina included Sparkster on his “Hall of Fame” on his publicly 

distributed website.  (Dkt # 23 at 1.)  In his post where he declared that Sparkster 

was included on his “Hall of Fame” on his spreadsheet, Balina said that the crowd 

voted for them to win the Amsterdam Event, and that he agrees.  (App. 87–88.)  In 

a YouTube video, when discussing Sparkster, Balina stated, “our team basically 

came to a conclusion that this was a project that we wanted to be a part of. Right? 

So disclosure: I have invested. I was part of their token sale. Now, with that being 

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said, this is not a paid endorsement.”  (App. 397.)  In multiple YouTube videos 

over the next month, Balina emphasized that Sparkster was on his “Hall of Fame.”  

(App. 324, 408–09, 412–13.)  

  While still on his World Tour in June 2018, Balina declared to a 

Budapest crowd that “Sparkster is, still right now . . . the best ICO of the month.”  

(App. 408–09.)  He stated that he was “very bullish” on Sparkster.  (App 412.)  In 

July 2018, Balina echoed these sentiments in Moscow and stated, “Sparkster is a 

better investment” than Quarkchain and he was “pretty certain” Sparkster would be 

profitable.  (App 412.)  Balina did, however, preface this opinion by claiming he 

“was not paid off by Sparkster.”  (App. 418.)  

  The SEC alleges that Balina violated Sections 5(a), 5(c), and 17(b) of 

the Securities Act.  (Id.)  In sum, the SEC alleges that Balina violated Section 5 by 

selling and offering to sell unregistered securities through his offering of SPRK 

Tokens through the pool.  (Id.)  The SEC further contends that Balina violated 

Section 7 by agreeing to receive a 30% bonus from Sparkster on the tokens he 

purchased in the Sparkster offering, while never disclosing the consideration he 

received when promoting the token.  (Id.)  The SEC filed its Complaint against 

Balina on September 19, 2022, seeking injunctive relief, disgorgement, civil 

penalties, and other appropriate and necessary equitable relief.  (Id.)   

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  On November 18, 2022, Balina filed his answer.  (Dkt. # 7.)  Balina 

contends that he was fooled by Sparkster and, like the other members of the pool, 

lost money after purchasing SPRK Tokens.  (Dkt. # 23 at 2.)  He also denies that 

he received compensation from Sparkster, alleging that he simply received a 

volume discount during a private pre-sale purchase, which is other purchasers 

typically receive in the industry.  (Id. at 3.)   

  The case was reassigned to the undersigned on April 21, 2023.  

(Dkt. # 17.)  Balina filed a Motion for Summary Judgment on September 23, 2023. 

(Dkt. # 23). The SEC responded on October 12, 2023. (Dkt. # 27).  Balina filed a 

reply on October 23, 2023 (Dkt. #29).  The SEC filed their Cross Motion for 

Partial Summary Judgment on November 21, 2023.  (Dkt. # 33).  Balina responded 

on December 11, 2023.  (Dkt. # 36).  Then, the SEC filed a Reply on December 22, 

2023.  (Dkt. # 38).  The SEC filed Notices of Supplemental Authority on March 

12, 2024 and April 4, 2024.  (Dkts. ## 39, 41.)  The Court held a hearing on 

May 9, 2024.   

LEGAL STANDARDS 

“Summary judgment is appropriate only if ‘there is no genuine dispute  

as to any material fact and the movant is entitled to judgment as a matter of law.’”  

Vann v. City of Southaven, 884 F.3d 307, 309 (5th Cir. 2018) (citations omitted); 

see also Fed. R. Civ. P. 56(a).  “A genuine dispute of material fact exists when the 

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‘evidence is such that a reasonable jury could return a verdict for the nonmoving 

party.’”  Bennett v. Hartford Ins. Co. of Midwest, 890 F.3d 597, 604 (5th Cir. 

2018) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)).  “The 

moving party ‘bears the initial responsibility of informing the district court of the 

basis for its motion, and identifying those portions of [the record] which it believes 

demonstrate the absence of a genuine issue of material fact.’”  Nola Spice Designs, 

LLC v. Haydel Enter., Inc., 783 F.3d 527, 536 (5th Cir. 2015) (quoting Celotex 

Corp. v. Catrett, 477 U.S. 317, 323 (1986)). 

“Where the non-movant bears the burden of proof at trial, ‘the movant  

may merely point to the absence of evidence and thereby shift to the non-movant 

the burden of demonstrating . . . that there is an issue of material fact warranting 

trial.’”  Kim v. Hospira, Inc., 709 F. App’x 287, 288 (5th Cir. 2018) (quoting Nola 

Spice Designs, 783 F.3d at 536).  While the movant must demonstrate the absence 

of a genuine issue of material fact, it does not need to negate the elements of the 

nonmovant’s case.  Austin v. Kroger Tex., L.P., 864 F.3d 326, 335 (5th Cir. 2017) 

(quoting Little v. Liquid Air Corp., 37 F.3d 1069, 1076 n.16 (5th Cir. 1994)).  A 

fact is material if it “might affect the outcome of the suit.”  Thomas v. Tregre,  

913 F.3d 458, 462 (5th Cir. 2019) (citing Anderson, 477 U.S. at 248). 

“When the moving party has met its Rule 56(c) burden, the  

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nonmoving party cannot survive a summary judgment motion by resting on the 

mere allegations of its pleadings.”  Jones v. Anderson, 721 F. App’x 333, 335 

(5th Cir. 2018) (quoting Duffie v. United States, 600 F.3d 362, 371 (5th Cir. 

2010)).  The nonmovant must identify specific evidence in the record and articulate 

how that evidence supports that party’s claim.  Infante v. Law Office of Joseph 

Onwuteaka, P.C., 735 F. App’x 839, 843 (5th Cir. 2018) (quoting Willis v. Cleco 

Corp., 749 F.3d 314, 317 (5th Cir. 2014)).  “This burden will not be satisfied by 

‘some metaphysical doubt as to the material facts, by conclusory allegations, by 

unsubstantiated assertions, or by only a scintilla of evidence.’”  McCarty v. 

Hillstone Rest. Grp., Inc., 864 F.3d 354, 357 (5th Cir. 2017) (quoting Boudreaux v. 

Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005)).  In deciding a summary 

judgment motion, the court draws all reasonable inferences in the light most 

favorable to the nonmoving party.  Wease v. Ocwen Loan Servicing, LLC, 

915 F.3d 987, 992 (5th Cir. 2019). 

Additionally, at the summary judgment stage, evidence need not be 

authenticated or otherwise presented in an admissible form.  See Fed. R. Civ. P. 

56(c); Lee v. Offshore Logistical & Transp., LLC, 859 F.3d 353, 355 (5th Cir. 

2017).  However, “[u]nsubstantiated assertions, improbable inferences, and 

unsupported speculation are not sufficient to defeat a motion for summary 

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judgment.”  United States v. Renda Marine, Inc., 667 F.3d 651, 655 (5th Cir. 2012) 

(quoting Brown v. City of Houston, 337 F.3d 539, 541 (5th Cir. 2003)). 

ANALYSIS 

  Balina and the SEC each ask the Court to decide several issues on 

summary judgment.  First, Balina asked for this Court to find on summary 

judgment that he did not violate Section 5 and Section 17 of the Securities Act 

because SPRK Tokens are not a security and because the alleged promotions and 

transactions occurred outside the United States.  Balina also argues that he did not 

violate Section 5(a) and Section 5(c) of the Securities Act because he did not sell 

SPRK tokens, and that he did not violate Section 17(b) because he did not agree to 

accept any compensation for promotion of SPRK tickets.  Lastly, Balina argues 

that he did not violate the Securities Act because any purported sales and offers to 

sell are exempt under Section 4(a)(1) of the Securities Act.  

  Conversely, the SEC argues that many of these issues can be decided 

on summary judgment in the SEC’s favor.  The SEC contends that the SPRK 

tokens are securities and that U.S. securities laws apply to Balina’s conduct 

because he targeted U.S. investors on U.S. social media platforms.  Then, the SEC 

avers that it established as a matter of law that Balina violated Section 5(a) and 

Section 5(c) of the Securities Act.     

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I. Application of the United States Securities Laws to Balina’s Conduct  

 Balina argues the SEC is attempting to extend its jurisdiction 

outside the United States.  (Dkt. # 23 at 2.)  Balina contends that the domestic 

transactions test from Morrison v. National Australia Bank Ltd. forecloses the 

SEC’s ability to exercise jurisdiction because no domestic transaction occurred.  

(Id. at 8) (citing 561 U.S. 247 (2010)).   

 In opposition, the SEC advances that the domestic transaction test 

from Morrison does not apply because Morrison applies Section 10 of the 

Exchange Act, an anti-fraud provision, as opposed to the registration (Section 5) 

and promotions (Section 17) provisions of the Securities Act at issue here.  

(Dkt. # 33 at 14.)  The SEC contends that instead, the Court should focus on the 

fact that Balina used U.S. social media channels to target U.S. investors.  (Id.)  

Alternatively, even if Morrison does apply, the SEC maintains a genuine issue of 

material fact exists “as to whether Balina’s sales were domestic transactions.”  

(Id. at 20).   

 “It is a longstanding principle of American law ‘that legislation of 

Congress, unless a contrary intent appears, is meant to apply only within the 

territorial jurisdiction of the United States.’”  Morrison, 591 U.S. at 255 (quoting 

EEOC v. Am. Oil. Co. (Amarco), 499 U.S. 244, 248 (1991), superseded by statute 

on other grounds 42 U.S.C. § 2000e(f), as recognized in Arbaugh v. Y&H Corp., 

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549 U.S. 500 (2006)).  The crux of this presumption is that Congress’s grasp does 

not extend beyond domestic matters.  See Microsoft Corp. v. AT&T Corp., 

550 U.S. 437, 454 (2007) (“United States law governs domestically but does not 

rule the world . . . .”).  “When a statute gives no clear indication of an 

extraterritorial application, it has none.”  Morrison, 561 U.S. at 255 (2010).  And 

“extraterritorial application would be a craven watchdog indeed if it retreated to its 

kennel whenever some domestic activity is involved in the case.”  Id.  

 The Court must use a “two-step framework” to apply the 

presumption against extraterritoriality.  Abitron Austria GmbH v. Hetronic Int'l, 

Inc., 600 U.S. 412, 417 (2023).  At step one, the Court must determine whether a 

provision is extraterritorial by evaluating whether “Congress has affirmatively and 

unmistakably instructed that” the provision at issue should “apply to foreign 

conduct.”  Id. at 417.  Neither party asserts that Congress has expressly provided 

that the statutes here should apply extraterritorially.   

 Therefore, the Court proceeds to step two, where it must determine 

where the “conduct relevant to the statute’s focus occurred.”  Abitron Austria 

GmbH, 600 U.S. 412, 419 (2023).  If the conduct relevant to the focus occurred in 

the United States, then the statute may be applied domestically even if other 

conduct occurred abroad.  Id.  However, if the relevant conduct occurred in another 

country, then the case involves an impermissible extraterritorial application 

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regardless of any other conduct that occurred in U.S. territory.  Id.  Therefore, the 

Court must first determine what conduct occurred is relevant to the focus of the 

Section 5(a), 5(c), and 17(b) of the Securities Act, and where it occurred.    

 Balina contends that the Morrison domestic transaction test, should 

govern our analysis of the relevant conduct.  The Morrison court held that there is 

a domestic application of Section 10(b) of the Exchange Act when (1) “the 

purchase or sale is made in the United States” or (2) the transaction “involves a 

security listed on a domestic exchange.”   Morrison, 591 U.S. at 269–70.  As the 

SEC correctly points out, Morrison relies on the fact that Section 10(b) was 

focused on sales of securities, rather than offers and promotions like Section 5 and 

Section 17.  While Morrison’s domestic transactions test may be properly applied 

to determine where sales occurred for the purpose of Section 5, the same is not true 

when the Court is determining where other conduct relevant to the focus of Section 

5 and Section 17 occurred, like promotions and offers.  As the Supreme Court 

stated, the “analysis applies at the level of the particular provision.”  Abitron, 600 

U.S. at 419, n.3.  Section 5 and 17 also regulate offers and promotions, not just 

completed transactions and sales.  Therefore, Morrison does not cabin this Court to 

only find SEC’s jurisdiction when there is a purchase or sale made in the United 

States or a security listed on the domestic exchange, as this is only the test for 

location where relevant sales occur.  Therefore, to the extent the Court is 

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determining whether sales occurred domestically, the Court will use the domestic 

transaction test from Morrison.  See Sec. & Exch. Comm'n v. Ripple Labs, Inc., 

No. 20CIV10832ATSN, 2022 WL 762966, at *11 (S.D.N.Y. Mar. 11, 2022) 

(finding that Morrison governs the domesticity of sales, but not offers, and 

applying different tests for both).  But as to offers under Section 5(e) and 

promotions under Section 17(b), the Court will look to other tests to determine the 

conduct relevant to the focus of the statute.  

 The court must examine the focus of congressional intent of a 

statute to determine whether domestic conduct occurred.  Abitron, 600 U.S. at 418.  

To make that determination, the court looks to the “object of the [statute’s] 

solicitude, which can include the conduct it seeks to regulate, as well as the parties 

and interests it seeks to protect or vindicate.”  Id. (internal citations omitted).  

 Section 5(e) seeks to regulate offers in the United States securities 

market without proper registration, like standardized disclosures.  15 U.S.C. 

§ 77e.4.  The Securities Act defines an “offer” as “every attempt or offer to dispose 

of, or solicitation of an offer to buy, a security or interest in a security, for value.”  

Id. § 77b(1)(3).  The SEC’s own regulations expressly state that: 

 “For the purposes only of section 5 of the Act (15 U.S.C. sec. 77e), 
terms offer, offer to sell, sell, sale, and offer to buy shall be deemed to 
include offers and sales that occur within the United States and shall be 
deemed not to include offers and sales that occur outside the United States.”  
 

 17 C.F.R. sec 230.901 (2020).  

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 Other district courts have held that “offers” under the Security Act 

have occurred where a person has either offered to dispose of securities in the 

United States or solicited an offer to buy securities or security-based swaps in the 

United States.  See Ripple Labs, Inc., 2022 WL 762966, at *12; S.E.C. v. Goldman 

Sachs & Co., 790 F. Supp. 2d 147, 165 (S.D.N.Y. 2011).  In S.E.C. v. Goldman 

Sachs & Co, the Court relied on the offeror’s presence in the United States to find 

that an offer occurred domestically, stating that phone calls made and emails sent 

from New York City were enough to constitute a domestic offer.  Id.  Balina’s 

location during the offers and promotions is debated, so there are not sufficient 

facts for the Court to find as a matter of law that he was located in the United 

States.  

 However, the object at the focus of a statute does not only include 

the conduct it seeks to regulate, but also those parties and interests that the statute 

intends to protect.  Abitron, 600 U.S. at 418.  Balina used U.S. channels, like U.S. 

social media networks, to target U.S. investors.  Section 5(e) seeks to protect 

United States investors and United States financial markets from the offer of 

unregistered securities.  So the Court must determine if the SEC can conclusively 

establish that Balina targeted United States investors. 

  Balina promoted SPRK Tokens on social media platforms, like 

YouTube, X, Instagram, Discord, Telegram, Google, and his blog site, to sell 

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SPRK tokens to United States investors.  (App. 29.)   All of these platforms are 

available in the United States, and YouTube, X, Instagram, and Balina’s blog are 

U.S. based platforms.  (Dkt. # 38, Ex. A.)  To market his Sparkster investment pool 

to investors, Balina announced to the Sparkster Investment Pool Telegram Group 

that “Sparkster Primablock is now live” and included a URL to contribute to the 

investment pool using Primablock.  (App. 276.)   Primablock recorded certain 

investors’ names, IP addresses, and physical addresses.  (Id.)  Four out of the 24 

Sparkster Investment Pool participants listed their country as the United States, and 

nine of the IP addresses were located in the United States.  (App. 277.)  Brian 

Furano, a participant in Balina’s pool, was in Santa Monica, California when he 

participated in the pool.  (App. 427–28; 432, 436–37.)  Marc Molinaro, another 

participant in Balina’s pool, was located in the United States when he completed 

the Google Form and transferred ETH to purchase SPRK Tokens from Balina’s 

allocation.  (App. 604–05.)  Though the location of the majority of the investors is 

unknown, the United States is the location of the largest share of investors from a 

known country.  

 Balina points to evidence of conduct related to the promotion, offer, 

and sale of SPRK that occurred outside the United States.  For example, Sparkster 

is a company incorporated in the Cayman Islands.  (Dkt. # 36, Ex. 2 at 156.)  

Balina also declared that the offering by Sparker was in the United Kingdom and 

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that PrimaBlock is a company registered under the laws of Estonia.  (Dkt. # 36, 

Ex. 2 at 4.)  Lastly, the “Shark Tank” like event at which Balina participated 

occurred in Amsterdam.  (App. 349.)  

 Nonetheless, the SEC contends that the ties to United States here 

are sufficient to show that Balina purposefully targeted United States investors, 

and the Court agrees.  Unfortunately, many elements of crypto transactions, like 

the identity and location of the purchasers, are characterized by anonymity.  

However, due to Balina’s use of United States social media platforms, along with 

the larger share of United States pool investors compared to other known countries, 

the Court finds that the SEC conclusively established that Section 5(e) may apply 

to Balina’s offers under the Securities Act.   

 Section 17 prohibits the use of instruments of communication in 

interstate commerce to promote securities in the United States without disclosing 

the amount of consideration received for that promotion.  15 U.S.C. § 77q(b) 

(emphasis added).  For the same reasons listed above, Balina’s promotions that 

used platforms available in the United States to reach Unites States investors is 

sufficient to show domestic conduct under Section 17(b).  

  Lastly, as it relates to the sales of securities under Section 5(a), the 

Court will apply the Morrison test.  Morrison held that Section 10(b) can be 

applied to domestic purchases and sales.  However, Morrison did not define what 

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constitutes a domestic sale, and neither has the Fifth Circuit.  Balina argues that 

this Court should adopt the standard articulated by the Second Circuit in Absolute 

Activist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 68 (2d Cir. 2012).  There, 

the Second Circuit stated that “to sufficiently allege a domestic securities 

transaction in securities not listed on a domestic exchange . . . a plaintiff must 

allege facts suggesting that irrevocable liability was incurred or title was 

transferred within the United States.”  Absolute Activist Value Master Fund Ltd. v. 

Ficeto, 677 F.3d 60, 68 (2d Cir. 2012). 

 Both Balina and the SEC argue that the “irrevocable liability” test 

supports their arguments.  Balina argues that because he was outside the United 

States from prior to May 4, 2018 until July 18, 2018, and that all his alleged 

promotions occurred at locations outside the United States.  Therefore, he argues, 

liability did not attach in the United States.   

   On the other hand, the SEC argues that the transactions here are 

domestic even under the Absolute Activist standard because some of Balina’s 

investors were in the United States when they committed to purchase SPRK Token 

through Balina’s investment pool.  (Dkt. # 33 at 25.)  Courts in the Second and 

Tenth circuit have found that a domestic transaction occurs when either the seller 

or the buyer is present in the United States.  Williams v. Binance, No. 22-972, 

2024 WL 995568, at *140 (2d Cir. Mar. 8, 2024) (stating that when Plaintiffs sent 

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buy orders and payments on the Binance platform, they “irrevocably committed” 

to the investments while in the United States); SEC v. Traffic Monsoon, LLC, 245 

F. Supp. 3d 1275, 1295 (D. Utah 2017) (“Either a domestic purchaser or a 

domestic seller of a security may bring a transaction within the purview of” the 

U.S. securities laws), aff'd sub nom. SEC v. Scoville, 913 F.3d 1204 (10th Cir. 

2019).  Here, even if Balina and the relevant companies are technically located 

outside the United States, many of the “buyers” in Balina’s pool were in the United 

States when they opted-in to the Sparkster pool.  

 Balina also asks the Court to use the test advanced by the Second 

Circuit in Parkcentral Glob. HUB Ltd. v. Porsche Auto. Holdings SE, 763 F.3d 

198, 216 (2d Cir. 2014).  There, the Second Circuit held that a “domestic 

transaction is necessary but not necessarily sufficient to make § 10(b) applicable.”  

Id.  Rather, the claims may be dismissed as extraterritorial when they are “so 

predominantly foreign as to be impermissibly extraterritorial.”  Id.   Balina noted 

that a court in this district cited Parkcentral approvingly in Eng v. AKRA Agric. 

Partners, Inc., 2017 WL 5473481 (W.D. Tex. Aug. 9, 2017).  However, since Eng 

was decided, many other courts have declined to follow Parkcentral, stating that it 

is inconsistent with Morrison.  SEC v. Morrone, 997 F.3d 52, 60 (1st Cir. 2021) 

(“[W]e reject Parkcentral as inconsistent with Morrison.”); Stoyas v. Toshiba 

Corp., 896 F.3d 933, 950 (9th Cir. 2018) (“[T]he principal reason we should not 

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follow the Parkcentral decision is because it is contrary to Section 10(b) and 

Morrison itself.”); In re Volkswagen AG Sec. Litig., 2023 WL 2505539, at *10-11 

(E.D. Va. Mar. 14, 2023) (rejecting Parkcentral as inconsistent with Morrison). 

Therefore, the Court will not rely on Parkcentral here.   

 The Court also notes that finding that a domestic transaction 

occurred here is consistent with public policy.  If Balina could evade the SEC’s 

lawsuit simply because he was located outside the United States while promoting 

crypto investments to United States investors on United States social media 

platforms, then others could follow in his footsteps in the future, by temporarily 

leaving the United States, to evade United States securities regulations while 

targeting United States investors and United Sates financial markets.  

 Accordingly, the Court finds Balina’s broader challenge to 

domesticity fails.  Section 5(a), 5(c), and 17(b) of the Securities Act apply to 

Balina’s conduct in this case as a matter of law.   

II. Whether the SPRK Tokens are Securities 

 Balina argues that this Court should grant summary judgment in his 

favor because the SPRK Tokens are not securities and therefore not subject to the 

SEC’s jurisdiction.  (Dkt. # 23 at 10.)  The SEC, on the other hand, argues that the 

Court should grant summary judgment because the SPRK Tokens were offered and 

sold as securities.  (Dkt. # 33 at 2.)  Therefore, a threshold issue common to both 

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the SEC’s Section 5 and Section 7 claims is whether SPRK Tokens were offered 

and sold as securities.  

 Under the Securities Act, the term “security” includes any 

“investment contract.”  15 U.S. C. §77b(a)(1).  The Supreme Court’s decision in 

SEC v. Howey, 328 U.S. 293 (1946) defines “an investment contract” as “(1) an 

investment of money; (2) in a common enterprise; and (3) on an expectation of 

profits to be derived solely from the efforts of individuals other than the investor.”  

SEC v. Sethi, 910 F.3d 198, 203 (5th Cir. 2018) (citing Williamson v. Tucker, 645 

F.2d 401, 417–18 (5th Cir. 1981).  

 The Howey test embodies a “flexible rather than static principle, 

one that is capable of adaptation to meet the countless and variable schemes 

devised by those who seek the use of the money of others on the promise of 

profits.”  Howey, 328 U.S. at 299.  Ultimately, there is sufficient evidence to show 

that Sparkster sought money from investors, through the purchase of SPRK 

Tokens, on the promise of development of Sparkster and an increased value of the 

investment. The Court will analyze each prong in turn.  

A. Investment of Money 

 The first prong of the definition is clearly satisfied.  The SPRK 

Token purchasers paid for their tokens using a crypto asset known as Ethereum in 

exchange for SPRK Tokens.  (App. 594.)  The investment of crypto assets is 

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equivalent to an investment of money.  SEC v. Shavers, No. 4:13–CV–416, 2013 

WL 4028182, at *2 (E.D. Tex. Aug. 6, 2013) (holding that use of Bitcoin was an 

investment of money). 

B. Common Enterprise 

 For the second prong, the Court must consider whether there is a 

“common enterprise.” S.E.C. v. Koscot Interplanetary, Inc., 497 F.2d 473, 478 (5th 

Cir. 1974).  A common enterprise is “one in which the fortunes of the investor are 

interwoven with and dependent upon the efforts and success of those seeking the 

investment or of third parties.”  Id.  This prong focuses on the “uniformity of 

impact of the promoter’s efforts.”  Id.  A common enterprise can be “evidenced by 

the fact that fortunes of all investors are inextricably tied to the efficacy” of the 

party seeking the investment.  Id. at 479.  Additionally, the Fifth Circuit has stated 

that the critical inquiry is confined to “whether the fortuity of the investments 

collectively is essentially dependent upon promoter expertise.”  Long v. Shultz 

Cattle Co., Inc., 881 F.2d 129, 140 (5th Cir. 1989) (citing Sec. & Exch. Comm'n v. 

Cont'l Commodities Corp., 497 F.2d 516 (5th Cir. 1974)). 

 In the context of cryptocurrency, other district courts have held that 

the nature of a common enterprise is one that pools invested proceeds, in an effort 

to create an ecosystem for the token, and thus boost the value of the investment.  

See, e.g., U.S. Sec. & Exch. Comm'n v. Kik Interactive Inc., 492 F. Supp. 3d 169, 

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179 (S.D.N.Y. 2020). 

 Sparkster promised to use the funds from the sale of the SPRK 

Tokens to develop and promote the digital ecosystem it created, establishing a 

common enterprise.  Sparkster stated in its Whitepaper that “[t]he development and 

launch of the Sparkster Platform by Sparkster Enterprise Ltd will be funded by the 

Company using the proceeds of the sale of the Tokens.”  (App. 442.)  In a 

June 1, 2018, YouTube presentation, when asked what Sparkster would do with the 

money it raised, Sparkster’s CEO answered, “Vast majority of money we’ve raised 

will be used to promote Sparkster and tell the world about Sparkster.”  (App. 532.)  

Daya also emphasized how the Sparkster platform was continuing to grow and 

increase in transaction per second (“TPS”) speed.  (See App. 362.)  The evidence 

shows that Sparkster was asking the purchasers of its tokens to make a bet on the 

success of Sparkster by soliciting investments through token purchases, key 

features of a common enterprise.  See SEC v. Kik Interactive Inc., 492 F.Supp.3d 

169 (S.D.N.Y. 2020) (holding that Kik’s use of funds from its issuance of tokens to 

develop and construct its digital ecosystem established a common enterprise); SEC 

v. Telegram Grp. Inc., 448 F.Supp.3d 352, 369 (S.D.N.Y. 2020) (finding a 

common enterprise where “[t]he ability to each Initial Purchaser to profit was 

entirely dependent on the successful launch” of the blockchain).  

 Other facts indicate that Sparkster was seeking purchasers of tokens 

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much like a company would seek investors before an I.P.O.  Sparkster highlighted 

the company’s current and upcoming partnerships.  (App. 400.)  The Whitepaper 

contained eight pages of biographies of executives and other employees, 

highlighting their educational and professional backgrounds.  (App. 497–505.)  

Essentially, Sparkster was highlighting the “promoter expertise” to give comfort to 

the investors about the “fortuity of the investments,” supporting a common 

enterprise.  See Long v. Shultz Cattle Co., Inc., 881 F.2d 129, 140 (5th Cir. 1989). 

  Balina argues that the “common enterprise” prong is not met 

because the SPRK Tokens did not entitle or grant its owner (1) any shares of stock 

in Sparkster (or any other company); (2) any voting rights; (3) any rights to a 

dividend or other profit share; or (4) any other financial rights.  (See Dkt. # 23, 

Ex.4 at 34-47).  Balina argues that to find a common enterprise under Howey, the 

Court must find that the investors share in the profits of the company.  

 No Fifth Circuit case requires that an investor own a stock or rights 

in a company for an investment contract to exist.  In fact, the Fifth Circuit has 

stated that the common enterprise prong does not require “interdependence 

narrowly in terms of shared profits or losses.”  Long, 881 F.2d at 141.  “Rather, the 

necessary interdependence may be demonstrated by the investors' collective 

reliance on the promoter's expertise.”  Id.  Here, the investors relied on Sparkster’s 

expertise and technical skill to develop the underlying software and blockchain 

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technology, engaging in a common enterprise that correlated with the success of 

the promoter.  This is evidenced by Sparkster’s promotion of the credentials of its 

management and constant assurance that the underlying software technology was 

in the process of improving, and even capable of changing the world.  (See App. 

354–63.)   

C. Expectation of Profits Derived From Efforts of Promoter or Third Party 

 For the third prong, the court must analyze whether the investment 

contract is one in which the investor is “led to expect profits solely from the efforts 

of the promoter or a third party.”  Howey, 328 U.S. at 298-99; see also S.E.C. v. 

Koscot Interplanetary, Inc., 497 F.2d 473, 483 (5th Cir. 1974).  The word “solely” 

has not been construed literally.  Long, 881 F.2d at 133.  Instead, the “critical 

inquiry” is instead “whether the efforts made by those other than the investor are 

the undeniably significant ones, those essential managerial efforts which affect the 

failure or success of the enterprise.”  Id. (citing Williamson, 645 F.2d at 418).  Out 

of circuit district courts have found that this prong is satisfied in the context of 

other crypto tokens in similar circumstances.  See SEC v. Terraform Labs Pte. 

Ltd., No. 23-cv-1346, 2023 WL 4858299, at *1 (S.D.N.Y. July 31, 2023) 

(determining the “reasonable expectation of profits” prong to be satisfied because 

an objective investor would have perceived defendants’ statements and actions 

promising to use the funds from the sale of tokens to continue to improve the 

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underlying ecosystem as indicating the possibility of profitable returns); SEC v. 

Coinbase, Inc., 23-cv-4738, 2024 WL 1304037, at *20 (S.D.N.Y. Mar. 27, 2024). 

 Balina principally argues that this prong could not be satisfied 

because Balina and other investors were buying a “finished product.”  (Dkt. # 23 at 

11–13.)   Balina points out that Sparkster’s CEO stated there was a finished 

product at the Amsterdam Event and marketed the SPRK Tokens as the means by 

which an individual could use the finished product.  Essentially, Balina contends 

that the token is more like a commodity that may increase in value, but that 

increase in value would not be dependent on the continuing efforts of the promoter.  

(Dkt. # 23 at 17.)    

 In support of this argument, Balina also points the Court to the 

SEC’s guidance on the topic that was available in 2018.  In 2018, Chairman Jay 

Clayton made a statement on cryptocurrencies and initial coin offerings, 

emphasizing that whether a token is a security varies on a case-by-case basis.  SEC 

Chairman Jay Clayton, “Statement on Cryptocurrencies and Initial Coin 

Offerings,” Dec. 11, 2017, https://www.sec.gov/news/public-statement/statement-

clayton-2017-12-11.  To distinguish, the SEC Chairman drew an example: 

 For example, a token that represents a participation interest in a 
book-of-the-month club may not implicate our securities laws, and may well 
be an efficient way for the club’s operators to fund the future acquisition of 
books and facilitate the distribution of those books to token holders. In 
contrast, many token offerings appear to have gone beyond this construct 
and are more analogous to interests in a yet-to-be-built publishing house 

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with the authors, books and distribution networks all to come. 
 

 Id.  

  SPRK’s Token is more like the “yet-to-be-built publishing house.”  

The Sparkster CEO admitted that the underlying technology had not reached its 

peak speeds, stating that the TPS was really at “6-1/2 thousand TPS across 6 cells” 

and that they needed to add more cells to achieve linear growth.  In fact, the 

Whitepaper had a section titled “The Road to 10 Million+ TPS.”  (App. 478.)  The 

Sparkster CEO admitted that Sparkster would use the proceeds from the sale of 

SPRK tokens to market and grow the business.  (App. 442.)  He also announced 

that he “built Sparkster to change the world” and that he can only do that with the 

support of investors and people like Ian.  (App. 365.)  Essentially, the tokens were 

a vehicle for Sparkster to finance its company as investors bet on the underlying 

technology.  If the investors did not trust Sparkster’s CEO to grow the platform 

and improve the technology, the SPRK tokens would be worthless.  This is why 

the Sparkster CEO highlighted the backgrounds and prestige of the management of 

the company.  Though the Court recognizes that the SEC’s guidance is not binding, 

the Court finds that Balina is incorrect that the SPRK token represents a “finished 

product.”  

 Balina argues that the SAFT and Whitepaper characterize the token 

as a finished product that can only be used within the Sparkster ecosystem.  

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(Dkt. # 36 at 5.)  However, when a Court analyzes whether something is a security, 

the Court will look to substance over form. Tcherepnin v. Knight, 389 U.S. 332, 

336 (1967).  Therefore, the Court will not consider express disclaimers in a 

contract when determining the character of the security. See SEC v. C.M. Joiner 

Leasing Corp., 320 U.S. 344, 352–55 (1943) (courts consider may look “outside 

the instrument itself” to consider the character of an instrument).   

 For the reasons stated above, and because the SPRK tokens meet 

all three prongs of the Howey test, the Court holds that the SPRK tokens are 

securities as a matter of law.  

III. Violation of Section 17(b) under the Act 

 Balina asks the Court to dismiss the SEC’s claim under Section 

17(b) of the Securities Act on summary judgment.  He argues that he “never 

accepted and never agreed to accept any compensation for allegedly promoting 

SPRK tokens.”  (Dkt. # 23 at 3.)  He contends his involvement was merely a bulk 

purchaser and he gained the same advantage as other pool purchasers.  (Id. at 3–5).  

In support, he directs the Court to redacted portions of the deposition of a fellow 

SPRK investor, Brian Furano.  (Id. at 5).     

 The SEC maintains that Balina received a significantly larger 

amount than the other members in the pool.  Namely, the SEC purports Balina was 

able to purchase $5 million worth of tokens, wheares others were not allowed to 

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invest more than the minimum.  (Dkt. # 24 at 2.)  

 Section 17(b) of the Act reads: 

It shall be unlawful for any person, by the use of any means or 
instruments of transportation or communication in interstate 
commerce or by use of the mails, to publish, give publicity to, or 
circulate any notice, circular, advertisement, newspaper, article, letter, 
investment service, or communication which, though not purporting to 
offer a security for sale describes such security for a consideration 
received or to be received, directly or indirectly, from an issuer, 
underwriter, or dealer, without fully disclosing the receipt, whether 
past or prospective, of such consideration and the amount thereof. 
 

 15 U.S.C. § 77q(b).   

 It is obvious that Balina promoted Sparkster.  He included 

Sparkster on his “Hall of Fame” list and repeatedly spoke favorably of a 

Sparkster investment on his World Tour.  However, promotion alone is not 

sufficient to constitute a violation of Section 17(b).  Balina must also have 

“directly or indirectly,” received, consideration and failed to disclose this 

consideration.  Id.  

 Balina constantly denied that he was being compensated for 

his promotion of Sparkster.  He stated that he was not getting paid off by 

Sparkster and that he was not being compensated.  (App 397, 481.)  Balina 

claims he simply thought it was a good product and disclosed his opinion to 

the public, much like he did not for other crypto projects.  (Dkt. # 23 at 4.)  

Therefore, it is also obvious that he did not disclose he was being 

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compensated.  The only issue remaining is whether Balina was actually 

compensated for his promotions.  

 Balina states in his affidavit that he simply received the same 

volume discount of 30% as every other purchaser in the pool.  (Dkt. # 23, 

Ex. 1.)  He further states that the discount was not conditioned on Balina’s 

promotion of Sparkster or its tokens.  (Id.)  Lastly, he claims that he did not 

have the opportunity to purchase more tokens than any other investor.  (Id.)  

 The SEC, however, points to evidence that Balina received 

certain benefits that other investors and the general public did not receive.  

The SAFT states that Balina is the purchaser, and that he may purchase an 

amount of $10 million for 43,333,333 Tokens.  (App. 183.)   Sparkster’s 

CEO told Balina that everyone else’s contribution had been capped, but 

Balina was allowed to invest above the minimum.  (App. 148) (“You’re the 

only one that’s been allowed to invest more than the min.”)   

 Regarding the bonus, Sparkster’s CEO explicitly stated that 

Balina would receive a 30% bonus, and that there would be “no bonus” for 

“everyone else.”  (App. 148.)   Balina acknowledged that he may “have to 

publicly disclose it to [his audience] due to SEC regulations.”  (Id.)  

 After the SAFT was executed, Balina added Sparkster to his 

Hall of Fame and continued to promote Sparkster around the world over the 

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next few months.  (App. 147, 397, 408.)  The conversations between Daya 

and Balina also indicate that there possibly could have been a prior 

conversation and understanding regarding a bonus and allocation to Balina 

in exchange for a spot in the Amsterdam event.  For example, Balina told 

Daya, “Hey Etienne is telling me he’s not getting an allocation even though 

he’s the one who helped you get into the pitch contest.”  (App. 148.)   

 If, however, Balina is correct that he did not actually receive 

compensation for his promotion, but rather the same bonus and allocation 

cap as everyone else, then a violation of Section 17(b) cannot be shown.  

Ultimately, the Court finds that there is a fact issue regarding the discount 

other members of the pool received, if any, whether there was a prior 

agreement for compensation in exchange for promotion, and whether Balina 

was given the opportunity to purchase more shares than other members of 

the Pool. There are inconsistencies between Balina’s affidavit, the 

WhatsApp messages between Balina and Daya, and the SAFT.  Therefore, 

there is an issue of material fact regarding the existence of a quid pro quo, 

and the Court declines to decide this issue on summary judgment.   

IV. Violations of Section 5 under the Act 

 The SEC argues that Balina violated Section 5(a) and 5(c) of 

the Securities Act as a matter of law.  Conversely, Balina argues that it is 

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conclusively established that Balina did not sell or offer to sell SPRK 

Tokens.  Therefore, both parties ask this Court to decide this issue on 

summary judgment.  

 To establish a Section 5 violation, the SEC must prove: “(1) 

[N]o registration statement was in effect as to the securities, (2) the 

defendant sold or offered to sell these securities, and (3) interstate 

transportation or communication and the mails were used in connection with 

the sale or offer of sale.”  SEC v. Cont’l Tobacco Co. of South Carolina, 463 

F.2d 137, 155 (5th Cir.1972).  Neither party asserts that Balina registered the 

security, so the first element is clearly met.   

 The parties dispute the second element. Balina contends that 

he did not sell or offer to sell SPRK tokens, but rather, he was a member of a 

pool of numerous individuals who purchased SPRK tokens.  (Dkt. # 23 at 6.)  

Balina highlights that he did not receive a commission for such sales and 

that other pool members purchased their SPRK tokens on the same price and 

paid the same fees.  (Id.)  He asserts the pool members did not purchase their 

tokens from him, and that the SEC cannot point to evidence that anyone 

purchased SPRK tokens from Balina himself.  

 The SEC, on the other hand, points to evidence showing that 

Balina sold the securities. Balina signed a $5 million contract with Sparkster 

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to buy 43,333,333 SPRK Tokens.  (App. 183.)  The same day that he signed 

the contract, Balina posted in a Telegram invitation to “fill out [link to 

Google form] to get whitelisted for my Sparkster pool. It will be starting one 

day.” (App. 48, 206.)  The next day, he went live and told his supporters to 

contribute.  (Id.)  Balina told the members that he was sending their 

contributions to Sparkster, notifying them when the funds were sent.  

(App. 149, 239.)  Balina sent the pool funds to Sparkster with the smart 

contract at PrimaBlock.  (App. 142.)  Sparkster’s CEO thanked Balina when 

he received the funds.  (App. 149.)  Then, the smart contract for the pool 

distributed the tokens to investors after they were received from Sparkster.  

(App. 256, 285.)  

 Balina possessed title to the tokens under the SAFT. The 

SEC’s expert stated that Balina actually received 690,471.1 tokens, which is 

much less than the amount stated in the SAFT.  (App 285.)  However, the 

SAFT still represents the fact that Balina is the “purchaser” of 433,333,333 

Tokens.  (App. 183, 189.)  Then, Balina allowed his paid subscribers an 

allocation of the Tokens he bought through the SAFT by allowing the 

subscribers to buy SPRK Tokens from his pool that he had control over.    

 Balina’s reliance on the lack of commission he received for 

the sale is also irrelevant.  First, Balina cites no case to support the 

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contention that a commission is needed to show a sale under Section 5.  

More importantly, Balina states that a lack of commission is relevant 

because it shows that Balina would have no incentive to sell the Tokens at 

the same price that he bought them.  However, Balina would have an 

incentive for selling the tokens—increased liquidity and value of the token 

due to an increase in investors.   

 In sum, Balina’s actions show that he violated Section 5(a) 

and Section 5(c) of the Securities Act by selling SPRK, an unregistered 

security, to investors through his pool of SPRK tokens.  

V. Whether Balina is Exempt from Liability under Section 4(a)(1) of 
the Securities Act  

 Under Section 4(a)(1) of the Securities Act, exempt 

transactions include “transactions by any person other than an issuer, 

underwriter, or dealer.”  15 U.S.C. § 77d(a)(1).  Balina claims that because 

he is not an issuer, underwriter, or dealer, he cannot be held liable for 

violations of the Securities Act.   

 Under Section 2(a)(11), an “underwriter” is “any person who 

has purchased from an issuer with a view to, or offers or sells for an issuer in 

connection with, the distribution of any security, or participates or has a 

direct or indirect participation in any such undertaking…”  15 U.S.C. 

§ 77b(a)(11).  

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 By offering SPRK Tokens through his pool, Balina acted as 

an underwriter, purchasing SPRK Tokens from Sparkster’s distribution to 

sell to members of his pool.  He formed the pool the same day he signed the 

SAFT, indicating his intent to distribute the tokens immediately.  (App. 

183.)  He also asked to receive more SPRK Tokens from Sparkster due to 

the amount of investor interest.  (App. 70.)  These facts show that he 

purchased the tokens from Sparkster with the intent to distribute the tokens.  

Therefore, Balina is not exempt under this provision.  See Vohs v. Dickson, 

495 F.2d 607, 620 (5th Cir. 1974) (holding that an underwriter is a purchaser 

with a view to a public offering of a security).     

CONCLUSION 
 

  For these reasons, the Court GRANTS IN PART AND DENIES IN 

PART Plaintiff’s Motion for Summary Judgment and DENIES Defendant’s 

Motions for Summary Judgment.  The Court holds as a matter of law that U.S. 

securities laws apply to Balina’s conduct and that the SPRK tokens are securities. 

The Court also holds as a matter of law that Balina violated Section 5(a) and 5(c) 

of the Securities Act.  The Court denies Defendant’s motion for summary 

judgment on the SEC’s Section 17 claim, which shall survive and not be decided as 

a matter of law.  

 

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  DATED: Austin, Texas, May 22, 2024.  

 

 

 
 
 

 
 

 

______________________________________ 
 
 

 
David Alan Ezra 

Senior United States District Judge 

 

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