SEC Wins $100 Million ICO Lawsuit Against Kik

The U.S. SEC has won its lawsuit against Kik Interactive Inc. for violating the country’s securities law with its $100 million ICO in 2017.

October 1, 2020 | AtoZ Markets – The US Securities and Exchange Commission (SEC) has been on a winning streak this year as Kik’s case, the 15-month long case has ended with the US District of Court ruling in the SEC’s favour. 

SEC wins historic ICO lawsuit against Kik

U.S. District Judge Alvin Kellerstein has sided with the SEC, ruling that the Canadian messaging firm Kik’s $100 million Initial Coin Offering (ICO) violated federal securities laws.

Judge Kellerstein responded to both parties’ requests for summary judgment, determining that Kik’s 2017 token sale meets the definition of a securities issuance according to the Howey test, as the ICO participants had a reasonable expectation of profit. Kik has shutdown its messaging platform to fight the lawsuit with SEC for the last three years. 

The court ruled, “in public statements and at public events promoting Kin, Kik extolled Kin’s profit-making potential. Kik’s CEO explained the role of supply and demand in driving the value of Kin: Kik was offering only a limited supply of Kin, so as demand increased, the value of Kin would increase.”

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The judge noted the unique nature of the case, highlighting that the Kik CEO had no “direct precedent” to inform his determination due to the groundbreaking nature of distributed ledger technologies.

Kik is considering a potential appeal

After analyzing statements from Kik’s executives and the firm’s business model, Judge Kellerstein likened Kik’s ICO to a “common enterprise,” saying that the success of the firm’s digital ecosystem “drove demand for the token and thus dictated investors’ profits.”

Kik Chief Executive Officer Ted Livingston said that he was “disappointed in this ruling” and that the company is considering its options, including a potential appeal. Pending a potential appeal from Kik, the next step is for both sides to “jointly submit a proposed judgment for injunctive and monetary relief” before October 20.

The SEC brought its complaint against Kik in June 2019, arguing that the firm had violated securities laws by selling $55 million worth of KIN tokens to U.S. investors in 2017. 

Back in May, Telegram also abandoned its project of Telegram Open Network and settled with the US SEC afterward.

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