The United States Securities and Exchange Commission (SEC) has now filed a lawsuit against the messaging company Kik. Specifically, the SEC is suing Kik over the firm’s initial coin offering (ICO) for its Kin token back in 2017.
The SEC sues Kik for its $100 million ICO from 2017
Moreover, the SEC filed an official complain on Tuesday, claiming that Kik’s ICO was an ”illegal $100 million securities offering”. According to the complaint, Kik’s ICO violated the registration requirements in Section 5 of the Securities Act of 1933.
Put simply, the SEC claims that Kik’s ICO was in violation of US securities law. This comes as Kik supposedly did not register the ICO sale with the correct authorities. Additionally, this legal battle is not all too surprising, as it has been brewing for the past couple of weeks.
Rather, this comes as Kik is about to launch a massive $5 million cryptocurrency initiative to fund a lawsuit against the SEC. This news came on May 28th, by Kik CEO Ted Livingstone in an episode of the cryptocurrency-centric Unchained podcast.
Livingstone is saying he looks forward to the court case, and that the SEC complaint “presents a highly selective and grossly misleading picture of the facts and circumstances surrounding our 2017 pre-sale and token distribution event. We look forward to presenting the full story in court.”
Moreover, Livingstone has since reiterated these views in a recent tweet. As such, it will be seen exactly where this legal battle will eventually end up. However, a number of legal experts are already noting that the SEC’s case against Kik appears strong.
This lawsuit could set an important precedent
This is primarily due to the fact that the SEC is focusing on Kik’s failure to register, rather than fraud or misconduct charges. According to Jake Chervinsky, a general counsel at Compound Finance, this is especially notable.
”The Kik action is significant because it represents the SEC’s first enforcement action for a pure regulatory violation – that is, a case where a token issuer simply failed to register with the SEC based on its good faith interpretation of the law.”
Other legal experts agree, noting that this is a ”straight up ’you didn’t register’” case, rather than securities fraud. Furthermore, the SEC reportedly possesses a wealth of evidence for its lawsuit against Kik.
These allegedly include material from Twitter, YouTube, as well as Slack messages. Nevertheless, this lawsuit can be more important than one might first realize. According to Katherine Wu, an independent legal researcher, Kik’s 2017 ICO is ”very typical” of 2017 ICOs.
”If this is a win for the SEC, it will force a ton of the similarly problematic ICO projects to either have to register or disgorge any profits they made.”
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Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the cryptocurrency industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.