SEC Suing Kik Over “Kin” Initial Coin Offering
It seems that the United States Securities and Exchange Commission (SEC) is cracking down on initial coin offerings (ICOs). As Bloomberg reports, the agency is now suing the popular messaging app Kik over the 2017 launch of “Kin.” That ICO reportedly raised $100 million for the app, but the SEC says the token amounted to an unregistered security, making its sale illegal.
In a press release regarding the suit, the SEC alleges that Kik had apparently been running out of money and saw the sale of their digital asset Kin as a way to raise funds. Moreover the SEC accuses Kik of marketing Kin as an investment opportunity and claimed they would increase the value of the tokens by integrating them into their messaging app. However the agency writes, “At the time Kik offered and sold the tokens, the SEC alleges these services and systems did not exist and there was nothing to purchase using Kin.” Since its launch, the value of Kin has fallen by more than half. Following the SEC’s suit, the price has dipped by nearly 30% according to CoinMarketCap.
Further explaining their suit against Kik, SEC Division of Enforcement co-director Steven Peikin 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.” He went on to say, “Companies do not face a binary choice between innovation and compliance with the federal securities laws.” Similarly Robert A. Cohen of the Enforcement Division’s Cyber Unit noted, “Kik told investors they could expect profits from its effort to create a digital ecosystem. Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”
Kik later responded to the SEC with a press release of their own, with CEO Ted Livingston saying, “We have been expecting this for quite some time, and we welcome the opportunity to fight for the future of crypto in the United States. We hope this case will make it clear that the securities laws should not be applied to a currency used by millions of people in dozens of apps.” Livingston added, “Kin is being used by more people in more apps every day, and come trial, Kin may be the most widely used cryptocurrency in the world. While the SEC’s actions are a challenge to overcome, they won’t affect the use, transferability and characterization of Kin, and we expect momentum in the Kin Ecosystem to only continue to grow.” The company had previously set up a website where interested parties can donate to Kin’s legal battle: DefendCrypto.com.
While not completely unexpected, the SEC’s move to formally file suit against Kik is certainly big news. As Bloomberg notes, many believe that the outcome of this case will give cryptos a better idea of what aspects of ICOs and tokens the SEC is taking issues with. The results may not be favorable but will hopefully be clearer. As for Kik, it will be interesting to see how many crypto enthusiasts rally behind them and what kind of a fight they put up against the government.