The U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Kik Interactive Inc. for allegedly running an unregistered sale of security tokens when the platform launched an ICO back in 2017.
Steven Peikin, co-director of the SEC’s Division of Enforcement in a statement said:
“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. Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
Kik Had Been Losing Money For Years
According to the SEC, Kik had been losing money for years on its sole product, which is an online messaging application and the company’s management has internally predicted that it would run out of funds in 2017. Also, earlier attempts by the platform to be acquired by a larger tech firm had failed.
So, in early 2017, Kik sought to pivot on a new type of business which it financed through the sale of one trillion digital tokens. The tokens dubbed kin were sold to the public and also to the wealthy purchasers at discounted prices. Eventually, the company managed to raise $55 million from U.S. based investors.
In the complaint, the SEC says that the Kin tokens recently traded for half the value the public had paid for during the offering. The filing also states that the Ontario Securities Commission had recently informed Kik that its tokens appeared to be securities.
Earlier this year Kik revealed to the Wall Street Journal that it planned to sue the SEC if the agency brought an enforcement action against the project.
In a statement offered earlier today, Ted Livingston, Kik CEO noted:
“This is the first time that we’re finally on a path to getting the clarity we so desperately need as an industry to be able to continue to innovate and build things.”
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