The SEC is suing Kik over its $100m Kin token ICO
The United States Securities and Exchange Commission (SEC) has sued Kik Interactive Inc, alleging the Canada-based chat platform conducted an illegal $100 million securities offering of digital tokens.
The SEC says that Kik sold digital tokens to US investors without registering the initial coin offering (ICO) -- a requirement under US securities laws.
An ICO is a form of crowdfunding that can be a source of capital for startups without the need for angel investors, banks, or traditional funding rounds. In return for investor cash, the organisations involved offer virtual coins and the transaction is recorded, typically, on a blockchain.
The Kin token was sold in 2017 and was marketed as an investment opportunity, the SEC alleges.
The SEC further alleges the ICO followed Kik losing money "for years" on its sole product, an online messaging application. The SEC's complaint alleges Kik's management predicted internally that it would run out of money in 2017.
[...] Kik raised more than $55 million from US investors, according to the SEC, and its complaint alleges that Kin tokens traded recently at about half of the value that public investors paid in the offering.
"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," Co-Director of the SEC's Division of Enforcement Steven Peikin said.
[...] In responding to the SEC action, Kik CEO Ted Livingston said he expects Kin's "momentum" to grow and that his company is going to fight the claims.
"We have been expecting this for quite some time, and we welcome the opportunity to fight for the future of crypto in the United States. We hope this case will make it clear that the securities laws should not be applied to a currency used by millions of people in dozens of apps," Livingstone said.
(Score: 2) by epitaxial on Sunday June 09 2019, @07:54PM (7 children)
I'm not familiar with Kik but if they are based in Canada what can the SEC do about it?
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @08:07PM
United States Empire does not honor a concept of legal sovereignty, any vassal countries all over the planet are expected to subject themselves to U.S. legal system, corporations included.
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @08:09PM
There is nothing as long as the arm of two entities: the IRS and the Dept. of the Treasury...
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @08:28PM
The green site covered all this:
Canadian SEC warned them this would be considered securities and they would need to register. Kik thought they could get around ti by issuing them in the US. US had the same determination they were securities and started an investigation into them.
And here we are.
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @08:51PM (2 children)
If they sold these (soon to be worthless) tokens to people in the US then US laws governing this type of transaction apply.
Kik's response leads me to believe they knew that they were skirting US laws and will contest the SEC's charges based on how some of the tokens are currently being used (rather than their initially intended use).
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @09:50PM (1 child)
To the people in the US that bought the tokens, sure. To the internet-company that has it's entire physical footprint in another country? Not so much. If the US wants to apply US law to them, step one would be initiating an extradition process to get them on US soil.
(Score: 0) by Anonymous Coward on Monday June 10 2019, @12:31AM
Um, no. The SEC can and will fine them, and the Canadian government will cooperate. Just think about the hundreds of millions of dollars in fines the SEC and DOJ slap on foreign companies (including lots of foreign banks) every year.
If governments don't play nice about these things then there's a very good chance unscrupulous companies will set themselves up in one country and try to prey on victims, or just blatantly break laws, in a neighboring country.
(Score: 0) by Anonymous Coward on Monday June 10 2019, @03:24AM
Oh I heard Canada can have your unsuspecting arrested on behalf of USA *cough*Huawei*cough*? Or is not applicable here?
(Score: 4, Informative) by JNCF on Sunday June 09 2019, @09:21PM (1 child)
These are the folks who accidentally kicked off [kodfabrik.com] the leftpad debacle. [npmjs.org]
(Score: 2) by takyon on Sunday June 09 2019, @10:03PM
Totally unaware that it has 200-300 million users.
https://en.wikipedia.org/wiki/Kik_Messenger [wikipedia.org]
[SIG] 10/28/2017: Soylent Upgrade v14 [soylentnews.org]
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @10:08PM
Would the SEC be bringing in the CIA if Kik funds weren't financing Islamic terrorist finishing schools?
(Score: 0) by Anonymous Coward on Sunday June 09 2019, @11:15PM
Probably going to be more like "beg for mercy".