The Securities and Exchange Commission (SEC) of the United States has filed a lawsuit against Kik for an alleged unregistered $100 million initial coin offering (ICO).
As per the SEC’s suit, the Canadian startup violated the set registration requirements of the Securities Act of 1933, Section 5. The securities commission is said to be demanding a fixed injunction, penalties, and disgorgement with interest.
$100 Million Raised via Token Sale
The SEC specifically pointed out that in the latter half of 2017, Kik raised $100 million via a token sale that didn’t comply with US securities legislation. The company allegedly did not register the token offering with the relevant authorities.
In a press release, the SEC’s Division of Enforcement co-director Steven Peikin said that by conducting a tokens sale, Kik denied investors of vital information that they were entitled to by law. This prevented investors from making a fully informed decision.
Robert A. Cohen on the Issue
Robert A. Cohen, the chief of SEC’s Enforcement Division’s Cyber Unit, also stated that the startup’s offering should be treated as a securities offering as Kik told its investors that they can expect to receive revenue from their efforts to create a digital ecosystem.
The SEC’s decision to sue Kik came after the company’s announcement that they will be initiating a $5 million cryptocurrency drive to fund a case against the commission.
Kik CEO Ted Livingston announced last May 28 that his tokenized startup is creating a fund dubbed DefendCrypto. Attorney Benjamin Sauter of Kobre & Kim agreed that by filing an action against the SEC has given Kik credible arguments against the securities regulator. He added that it places a legitimate risk on the SEC if it follows through with its enforcement plan against the Canadian company.