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The Securities and Exchange Commission has launched a $ 100 million lawsuit against new Canadian social media company Kik Interactive for selling non-registered tokens in one of the most publicized cryptocurrency crackdowns. .
The main US financial supervisor has accused Kik, who has launched a digital messaging application on his messaging application, to carry out an illegal supply of securities. The company's "Kin" token has generated more than $ 100 million in its bid for 2017.
"Companies are not faced with a binary choice between innovation and compliance with federal securities laws," said Steven Peikin, co-director of the SEC's Division of Enforcement, in a press release.
Kin tokens have arrived on the market almost at the height of the initial offer of coins, or ICO. Last year, the fundraising method generated total funding of $ 12 billion, according to Autonomous Next estimates. A cryptocurrency called EOS reported $ 4.2 billion, while the Telegram messaging application generated $ 1.7 billion.
The gold rush was mainly driven by small investors, which drew the attention of regulators who repeatedly said that the lack of chip registration was a violation of investor protection laws. Crypto entrepreneurs largely disagree, stating that tokens should not be considered on the same basis as traditional stocks.
"This is the first time we are finally on the verge of achieving the clarity we so badly need as an industry to continue to innovate and build," said Kik founder and CEO Ted Livingston , at CNBC.
Livingston told the Wall Street Journal earlier this year that the company was planning to crack down on SEC enforcement measures. The company has launched a crowdfunding campaign to fight the SEC crackdown. DefendCrypto.org claims to have raised $ 4.6 million so far.
In an ICO, coins or tokens are sold in the form of crowdfunding or small amounts collected from a large number of investors. Instead of dividends or voting rights, crypto-currencies often promise access to a network or a future service. But they are often backed by an abstract idea or, in some cases, nothing at all. The SEC accused Kik of marketing tokens as an investment opportunity and telling investors that an increase in demand for his "Kin" cryptocurrency would drive up the value. The company also said it would introduce tokens as payment in its messaging application and create a system rewarding other companies that adopt cryptocurrency. However, at the time of the ICO, the SEC had claimed that none of this existed.
At one point, in January 2018, Kin's cryptocurrency reached a market capitalization of $ 987 million, according to CoinMarketCap.com. It is now worth about $ 24.5 million, which represents a drop of 97%.
Last June, SEC President Jay Clayton reiterated that the agency would not update the rules for defining this new class of digital assets. Bitcoins and Ether are the only cryptocurrencies explicitly exempted from securities law by the SEC. All other offers of initial coins constitute securities and, as Clayton said, "If it is a security, we regulate it".
"We will not violate the traditional definition of a security that has been working for a long time," Clayton told CNBC last year. "We have been doing this for a long time, it is not necessary to change the definition."
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