Sparkster is suddenly moving $22M. Is this project a scam?

Sparkster is one of the most scandalous ICOs, which raised tens of millions of dollars four years ago. However, it also became the first token sale threatened to face legal action in Britain in 2019. The company concluded its first ICO sale in July 2018, and it raised $30 million overall. But investors claimed afterwards that the founders purposely misled them during the sale, promising returns as high as 300 times their initial investments. They also stated that the Sparkster team didn’t make any progress with the underlying product.

The team originally slated SPRK tokens for release a month after the sale’s completion. Despite that, the project has repeatedly pushed back the token release date. The company pitched Sparkster as a decentralized cloud network which would allow customers to write software without needing to code. Built on the Ethereum (ETH) platform, the project’s native SPRK tokens are units of exchange for users to sell software ideas on an online marketplace. The team claims on its website that its network is highly scalable as well as able to handle more than ten million transactions per second.

According to project documents, 30% of the tokens offered by Sparkster were supposed to be distributed between the initial investors and the founding team. Moreover, the project promised to use the funds to build out a team and cover legal fees and marketing. However, very little happened in the months afterwards. With no product arriving and without receiving promised SPRK tokens, investors finally threatened the team with legal action in 2019. Meanwhile, Sparkster denied all claims of wrongdoing.

Are the communication channels with Sparkster a fluke? 

The project’s Telegram community channel does not allow community members to send messages or interact. A related Telegram channel posted web links allegedly to product demonstrations in October 2021 and February 2022. However, those sites are walk-throughs for customers instead of functioning tools. On the other hand, according to Sparkster’s GitHub repository, the last activity was three years ago, in March 2019. All of these seem suspicious, but the story doesn’t end there.

The project recently converted almost $22M of ether into the stablecoin USD Coin (USDC). Such conversion by the seemingly dormant blockchain project has got some observers crying foul, as well as demanding the blacklisting of the funds.

With the birth of Defi, numerous projects took a leap, offering allegedly world-changing ideas and huge returns to investors. While some of them truly delivered, Sparkster’s community members are still waiting. The team posted its last tweet from the project’s Twitter account in 2021. It contained a link to a demonstration of a supposedly upcoming product. However, the company hasn’t communicated from that account since then.

After such extended inactivity, the wallets holding the proceeds from the initial coin offering suddenly became active this weekend. By Monday, they were sitting on more than $22 million of the stablecoin USDC. Investors think that this move is unusual. Thus, it’s raising suspicions among some community members – especially considering the absence of a public explanation from the SPRK team.

Why are the funds on the move? 

According to blockchain data, more than $22 million worth of ether (ETH) from several Sparkster wallets was converted into USDC over the weekend. Those wallets were last active over three years ago.

The pseudonymous blockchain analyst zachxbt was the first to report the findings. One of the wallets saw some 2,599 ETH converted to USDC. It’s tagged as Sparkster: Wallet 5 on blockchain explorer Etherscan. Before this transaction, the wallet was last active in August 2018.

Another wallet – Sparkster: Wallet 4 also received 3,002 ETH approximately 1,371 days ago. Moreover, it converted the full amount over three transactions to more than 6M USDC three days ago. The data showed similar ether amounts converted to USDC on other wallets over the weekend. All of those were last active over three years ago.

Thus far, Sparkster has not responded to any requests for comment. Community members have already tried to bring the USDC holdings to issuer Circle’s attention on Monday, though. They asked the team to blacklist the funds.

What did the project promise initially? 

Sparkster started its initial coin offering sale on July 7, 2018, introducing its native token SPRK. The price of this ERC20 token was 2800, which is quite high for the newly launched token. The total amount of tokens is 435,000,000, but only 67% was available for investors during the sale. The company accepted ETH, BTC, USD, XRP, and XLM in exchange.

According to the founder team, Sparkster was a platform of empowerment. It would empower its users to bring their ideas to life by building software without learning how to code. Customers would have access to intuitive drag and drop interfaces. They would also use the ability to define business logic in plain English to build anything imaginable. The company claimed that creators would be able to focus on what they wanted to build. And this platform would transform their ideas into working software in seconds.

The team got inspired by MIT Scratch, taking the position that if young children could build games with simple building blocks, it could empower everybody to build enterprise-grade applications similarly. After all, innovation in our century is almost exclusively dependent on software development. There are a plethora of examples. For instance, emerging companies such as Airbnb, Uber, and Instagram are exclusively software companies. The Sparkster platform promised to democratize access to innovation and make innovation in the 21st century accessible to everybody.

Industry’s revolution was the goal

Furthermore, the Sparkster platform claimed to be to software what Uber was to the taxi industry – an industry’s revolution. The team announced that competitors such as Microsoft®, Oracle®, and SAP®, would have their business models fundamentally disrupted by the advent of user-generated software empowered by their platform.

The team assured investors that it was building the world’s fastest Decentralized Cloud. The latter would allegedly enable people to execute this software across a network of the community’s cell phones. That combined package would be the cheapest, most democratic and fastest way to build and run the software.