By The SEC aka the United States Securities and Exchange Commission (SEC) has sued Kik, a Canadian startup for holding an unregistered initial coin offering (ICO) worth $100 million. The news was announced by the regulator on June 4th.
As per the announcement, the SEC stated that Kik was in violation of registration requirements found within Section 5 of the Securities Act of 1933. The agency has stated that is seeking a permanent injunction, disgorgement with interest and a penalty.
The SEC has specifically alleged that in 2017, Kik managed to raise $100 million via a token sale which was reportedly not compliant with U.S securities laws as it had not been registered with the proper authorities.
The co-director of the SEC’s Division of Enforcement, Steven Peikin, stated in the press release that when Kik carried out its Kin tokens sale it “deprived investors of information to which they were legally entitled and prevented investors from making informed investment decisions.”
The chief of the Enforcement Division’s Cyber Unit, Robert A. Cohen, further argued that Kik’s offering should be considered as securities offering in light of the fact that the startup told investors to expect profits from its efforts in creating 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.”
Notably, the SEC’s case comes not long after Kik announced that the firm is launching a $5 million crypto project to fund a lawsuit against the regulatory watchdog. Kik’s CEO Ted Livingston announced on May 28th that the startup is setting up a fund known as DefendCrypto.
Lastly, a lawyer a prominent law firm known as Kobre & Kim, Benjamin Sauter stated that Kik’s move to initiate action against the SEC could hold credible arguments which would see the regulator bear “legitimate risk if it decides to follow through with an enforcement action.”
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