SEC approves Kik App More than $ 100 million in initial coins

The Securities and Exchange Commission is suing Kik Interactive, an anonymous, Canadian-based email service, claiming that the company's pivot, Hail Mary, had helped it raise money through a sale. cryptocurrency in 2017 was tantamount to illegal and unregistered securities offerings, reported Bloomberg.

This 2017 sale was an initial offer of coins (ICO), a complex financial vehicle in which investors were getting digital tokens instead of traditional stock. In most cases, ICOs involve "utility" tokens designed to be integrated with the functionality of a chain-of-blocks service, creating added value in the process. According to the SEC, almost all tokens (the Bitcoin and Ether crypto-currencies are the only exceptions) are essentially securities and are therefore subject to well-established regulatory obligations under the law.

At the time of the OIC, Kik was witnessing a decrease in user activity in its application and rapid use of cash – there remained about $ 26 million in the bank, with a loss rate of 3 millions of dollars a month. SEC documents indicate that, while touting its new "Kin" symbol as an opportunity for investors to make huge profits, Kik has not publicly disclosed its troubled financial status or "other details." on Kik and the offer that Kik would have been required to include in a registration statement filed with the SEC for the offer ".

Kik has raised more than $ 100 million through the sale, including 55 million US investors. The SEC wrote in the documents that "the offer and sale of Kin by Kik were not registered with the SEC and that the investors had not received the information required by federal securities legislation".

The SEC claims that Kik was fully aware that its ICO could be considered an offer of securities. Although the agency does not charge the fraud company, the court record documents claim that Kik proceeded with the sale without incorporating functionality into his token beyond the stickers.

Yes, stickers:

In the end, Kik sued the OIC without first reaching a decentralized economy for Kin and without even ensuring that investors would be able to buy goods and services with the chips as soon as they are received. Instead, Kik was looking for a viable minimum surface product in the form of digital comic stickers that would be an additional benefit supposedly for Kik Messenger users who purchased Kin. The stickers would be inside Kik Messenger and would only be available to Kin buyers who also have a Kik Messenger account.

… Kik did not design the cartoon sticker to entice people to buy Kin for purposes other than investing and, anyway, the stickers could not be purchased with Kin. Instead, Kik developed the stickers by attempting to create a hypothetical "use" of the tokens, which, in Kik's view, was relevant in determining whether Kin's sales by Kik were corporate actions under the terms of the securities legislation.

Specifically, stickers like that of a honey badger holding a boombox with the caption "Allows JAM":

Although Kin subsequently reached a market capitalization of $ 987 million in January 2018, according to CNBC, it then dropped 97% to $ 24.5 million.

"Companies do not face a binary choice between innovation and compliance with federal securities laws," said Steven Peikin, co-director of the SEC's Enforcement Division to the press, in a press release.

As the New York Times noted, the SEC has already attacked ICO operators, but the case against Kik is the largest and most prominent one. Kik himself collects about $ 5 million for a legal defense fund, DefendCrypto.org, which had successfully collected just over $ 4.3 million. According to an article in January 2019 in Breaker Mag, Kik CEO Ted Livingston and his team continued to insist that Kik be a currency rather than a security.

In the lawsuit, the SEC wrote that it sought to ensure that Kik "recovers his ill-gotten gains and pays pre-judgment interest thereon", as well as pecuniary penalties in civil money, in accordance with Section 20 (d) of the Securities Act [15 U.S.C § 77t(d)]In a statement to the sector's publication, Coindesk, Livingston wrote that the SEC "presents an extremely selective and extremely misleading picture of the facts and circumstances surrounding our 2017 presale and token distribution event. We look forward to presenting all history in court. "