In a press release issued June 4, 2019, the U.S. Securities and Exchange Commission (SEC) stated that it was suing Kik Interactive Inc. for conducting a $100 million illegal initial coin offering (ICO) of digital tokens.
SEC Goes Hard on Kik
Kik, a social media turned crypto firm has been locking horns with the U.S. financial watchdog over its hugely successful ICO in 2017. The genesis of the struggle revolves around the company’s ICO which, according to the SEC, broke Section 5 of the Securities Act of 1933.
The Section states that all securities offerings before going public must be registered with the SEC. For the violation, the regulator “seeks a permanent injunction, disgorgement plus interest, and a penalty” from Kik.
The SEC argues that the company’s ICO was a last moment effort to help itself from sinking under an enormous financial crunch. Dubbed “KIN,” the company’s digital token was sold to the public and high net worth individuals who helped it raise about $100 million.
Steven Peikin, the Co-Director of the SEC’s Division of Enforcement, said:
“By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions.”
The regulator further claims that Kik marketed its tokens as an investment opportunity, convincing investors that rising demand would drive up the value of KIN token. However, the digital token currently trades at about half the price that public investors paid in the ICO, the SEC notes.
Kik Maintains that KIN Is not a Security
The lack of clarity regarding the legal definition of crypto tokens has led many to shape the status of cryptocurrencies to fit their narrative.
Earlier this year, Kik CEO, Ted Livingston decided to challenge the SEC’s proposed enforcement action over the company’s ICO saying that the company’s rebuttal is wholly valid and could set a precedent for the industry. The Kik co-founder maintained that KIN was a pure currency and didn’t fit the criteria of being a security as defined by the SEC.
On a more recent note, BTCManager reported how Livingston announced the launch of a $5 million fund to fight the SEC. The fund is part of a broader campaign called DefendCrypto and has received support from various thought-leaders in the emerging industry.
That said, it will be interesting to see how the troubled firm retaliates to the latest offensive from the regulator. More can be learned about the Kik-SEC fiasco here.