The US Securities and Exchange Commission (SEC) filed a lawsuit against the company-developer of instant messenger Kik, accusing it that during the ICO in 2017, it led an unregistered sale of securities. It is reported by CoinDesk.
In particular, the Canadian Kik Interactive Inc. accused of violating the provisions of section 5 of the Securities Act of 1933, under which the placement of securities requires registration.
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. Companies do not face a binary choice between innovation and compliance with the federal securities laws.
Co-director, SEC’s Division of Enforcement
The suit itself says that in October 2016, Kik hired an investment bank, which was supposed to help with identifying companies that could acquire its business. The investment bank contacted 35 market participants and signed non-disclosure agreements with seven companies that wanted more information about Kik.
By February 1, 2017, however, all seven bidders refused to buy Kik. Faced with the problem of diminishing reserves and not having the prospect of making profits from their current business, Kik's management discussed the idea of launching a digital token as a means of raising capital. As a result, it was concluded that the ICO will be the only possible option for raising capital.
As a result of the ICO project, Kik raised $ 98 million, using these funds to develop its Kin token and the ecosystem based on it, in which users, it was claimed, could earn and spend cryptocurrency.
In January, the startup management announced that it intends to judicially challenge the decision of the US Securities and Exchange Commission (SEC) to recognize the token Kin as a security.
In addition, in May, Kik, with the support of Coinbase, launched a special fund to cover potential legal costs.