In a turn everyone should’ve seen coming, the US Securities and Exchange Commission (SEC) is suing messaging app Kik for its initial coin offering (ICO).
In court documents released yesterday, the SEC outlined that Kik’s sale of one trillion “Kin” tokens was not registered with the SEC. As such, the SEC claims it is an “illegal securities offering of digital tokens.”
From May to September 2017, Kik sold its digital tokens to over 10,000 investors all over the world and raised around “$100 million in US dollars and digital assets,” the document reads.
“Kik had lost money for years on its sole product, an online messaging application, and the company’s management predicted internally that it would run out of money in 2017,” the SEC said in an accompanying statement.
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“The complaint further alleges that Kik marketed the Kin tokens as an investment opportunity,” the statement continues. “Kik allegedly told investors that rising demand would drive up the value of Kin, and that Kik would undertake crucial work to spur that demand, including by incorporating the tokens into its messaging app, creating a new Kin transaction service, and building a system to reward other companies that adopt Kin.”
Kik also told employees a similar story. The company’s CEO told employees in an email that as demand for the company’s token goes up, so would its price. “Buy today, sell tomorrow, profit,” he said.
"Buy today, sell tomorrow, profit." pic.twitter.com/Cpmk5HK8X7
— Palley (@stephendpalley) June 4, 2019
By definition, the Kin sale was an unregistered, unlicensed, and illegal security.
Indeed, it should come as no surprise then that the SEC is suing Kik for its ICO, and the company must’ve seen it coming.
Back in January, Kik was already preparing itself for the impending legal battle after the SEC decided to class its token sale as a security offering.
Given the SEC’s disclosure that Kik has been losing money since its ICO, it’s also not surprising that the firm was trying to crowdfund its legal battle. It claims the case is pivotal for the future of cryptocurrency, but it sure can use the cash anyway.
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