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SEC sues KIN Coin ICO

Maya Mandzikasvili | Jun. 5, 2019
SEC sues KIN Coin ICO

June 05, 2019 | AtoZ Markets - The U.S. Securities and Exchange Commission SEC has filed a complaint to the court of Southern District of New York on messenger app maker Kik for it's $100 million ICO. The company is allegedly suspected of not registering its kin token sale which violates federal securities law. Has Kin coin ICO really played not by the rules? Is kin coin scam?

Kin coin scam or kin security coin?

Kik was founded in 2009 by students of the University of Waterloo in Canada. The company has developed Kik messenger, commonly called Kik, a freeware instant messaging mobile app for iOS and Android operating systems.

In early 2017, the mobile software company decided to launch a new type of business, which was funded by selling one trillion digital tokens dubbed as Kin. The token is used in a variety of mobile applications.

Kin coin ICO reportedly started in May 2017 and have already helped Kik to raise $48,600,000.

During the Kin coin ICO campaign, the startup was selling its tokens to the public and to wealthy buyers at a reduced price. As the company reports, the funds they raised in ICO, are used to support the development of new markets for people to earn and spend a cryptocurrency that runs on its own blockchain.

SEC sues kin coin ICO: Kik violated Section 5 of the Securities Act of 1933

The agency claims, that Kik violated Section 5 of the Securities Act of 1933, which requires offerings to be registered.

Steven Peikin, co-director of the SEC’s Division of Enforcement stated that the agency suspects that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions while taking part in Kik coin ICO campaign.

SEC’s alleges that Kik had lost money for years on its sole product and the company’s management predicted that it would run out of money in 2017.

According to the U.S. agency’s officials, Kik’s losses averaged about $30 million a year. The regulator also pointed on earlier attempts by Kik to be acquired by a larger technology company with seven potential suitors all declining to buy or merge with the startup.

It appears that U.S. financial regulator to have built up a strong case in its initial court move against Kin coin ICO. As a confirmation of this suggestion, it is worth to mention Drew Hinkes words.

An attorney for Carlton Fields and general counsel to Athena Blockchain said that the SEC included a great number of facts in its lawsuit.

Hinkes mentioned that the financial regulator provided a number of evidence from different resources, including:  

  • YouTube
  • Slack messages;
  • The Twitter
  • The roadshow that Kik conducted in the early stages of its token sale.

The attorney outlined, that the SEC has a “ton of documentary evidence and a ton of facts.

Katherine Wu, an independent legal researcher pointed out to the fact that Kik 2017 token sale did not differ from other ICO’s at the time.

She noted in case of the SEC win over Kik, tons of the similarly problematic ICO projects will be forced to have to be registered or disgorge any profits they made.

In response, to the SEC compliant Kik’s general counsel, Eileen Lyon said that the agency makes a number of inaccurate assumptions which “stretch the Howey test well beyond its definition” and that the authority's push will not withstand judicial scrutiny.

SEC and Kik interaction like a never-ending story

Earlier this year, Kik representatives revealed their plans to the Wall Street Journal to sue the U.S. SEC if the agency files a lawsuit against the project.

Kik CEO Ted Livingstone noted last month that the company has already spent $ 5 million on cooperation with the SEC.

The company reportedly launched a $ 5 million crowdfunding campaign, after that, called Protect Crypto, in support of a potential lawsuit.

However, Stephen D. Palley a partner in the Washington D.C. office of Anderson Kill said that SEC strong complaint does not necessarily mean that the case will proceed to a jury trial.

It is worth to mention, that a court may not read the complaint as a scathing indictment and it is still possible that Kik and the SEC will come to a settlement prior to reaching a jury trial.

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Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.