The United States Securities and Exchange Commission (SEC) has made an unprecedented claim that ETH transactions take place in the United States due to Ethereum nodes being “more densely packed” in that country than anywhere else. other.
The SEC’s argument falls within a Sept. 19 lawsuit against crypto researcher and YouTuber Ian Balina, who alleged, among many other complaints, that Balina conducted an unregistered offering of Sparkster (SPRK) tokens. when he formed an investment group on Telegram in 2018.
The SEC alleges that At the time that US-based investors participated in the Balina investment pool, Ether (ETH) contributions were validated by a network of nodes on the Ethereum blockchain, “which are most densely clustered in the United States.” United than in any other country.”
The SEC argued that, as a result, “those transactions took place in the United States.”
Right now, it is unclear whether such a claim will hold up in court or whether there is any legal precedent in play. However, currently, 42.56% of the 7,807 Ethereum nodes are located in the United States.according to Ethernodes.
Speaking to Cointelegraph, Aaron Lane, an Australian lawyer and researcher at the RMIT Blockchain Innovation Hub, said that the distribution of Ethereum nodes is largely irrelevant to the case at hand, explaining:
“The fact that we have a US-based plaintiff, a US-based defendant and transactions flowing from the US is what is most relevant here. It doesn’t matter if the payment was made in Ethereum, Mastercard or any payment network for that matter.”
Lane said that while the SEC claim was interesting, he added that Even if Balina’s lawyers don’t contest the jurisdiction issue, it won’t have any impact on future cases for now:
“The defense can grant jurisdiction here, and if they do it won’t be a problem, and if it’s not a contested issue then the court won’t say anything about it. Any concern about legal precedent at this stage is premature.”
The SEC has previously been criticized for its regulatory approach towards cryptocurrencies, which has been labeled by some as “regulation by enforcement.”
The chairman of the SEC, Gary Gensler recently hinted that Ether-based staking could also trigger US securities laws shortly after Ethereum transitioned to proof-of-stake on September 15.
In response to the demand, Balina said in a 19-part Twitter thread that the allegations were “baseless” and that she “rejected the deal for them to [la SEC] have to prove it.”
1/ Official Statement on the baseless SEC charges regarding Ian Balina being compensated for promoting Sparkster:
The SEC Enforcement Division’s proposed charges against Mr. Balina are an unfounded effort based upon multiple misconceptions of fact and law, enumerated below.
— Ian Balina (@DiaryofaMadeMan) September 19, 2022
1/ Official Statement on the SEC’s Unsubstantiated Accusations Regarding Ian Balina’s Compensation for Sparkster’s Promotion: The charges proposed by the SEC’s Division of Enforcement against Mr. Balina are an unsubstantiated effort based on multiple misconceptions of in fact and in law, listed below.
Balina did not comment on the SEC’s assertion that the United States should have jurisdiction for Ethereum-based transactions due to the heavy distribution of US-based nodes.
The Balina accusations come as Sparkster and its CEO, Sajjad Daya, recently settled their case with the SEC on September 19, agreeing to return $35 million to “injured investors.” after its initial coin offering (ICO) in 2018.
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