Rajarshi Mitra
Independent Analyst
- Kik Interactive violated U.S. securities laws with its token sale.
- The company announced that it is setting aside $5 million to fight the SEC.
The U.S. Securities and Exchange Commission (SEC) announced that it is suing Canadian company Kik Interactive for conducting an illegal $100 million securities offering of its digital tokens Kin Coin. SEC reported that the company violated the U.S. securities laws by selling its Kin tokens to U.S. investors without registering.
Kik Interactive was developing an anonymity-focused online messaging app which concluded in November 2017. The product was at the core of the company’s ICO. The company documents revealed that it was running short on funds.
In early 2017, the company raised approximately $100 million after launching its ICO to institutional and retail investors out of which $55 million were from U.S. citizens. Kik Interactive’s Kin Foundation announced in May that it is allocating $5 million to settle the dispute.
SEC also reported that the Kin tokens were marketed as “an investment opportunity” by Kin Interactive. The firm claimed that its tokens would be incorporated in its messaging app. However, the U.S. regulator stated that the company neither issued any services as such nor delivered any products that could be purchased using the Kin token.
“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,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement.
Though Kin Coin reached as high as almost $1 billion in January 2018 after the total market cap, yet the current total value of the coins in circulation is just below $25 million.
“Kik told investors they could expect profits from its effort to create a digital ecosystem,” said Robert A. Cohen, Chief of the Enforcement Division’s Cyber Unit.
The SEC seeks a permanent injunction, disgorgement plus interest, and a penalty on the company.
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