SEC sues start-up Kik because of its ICO in 2017

Crypto News

The US Securities and Exchange Commission (SEC) sued the developer of the messenger Kik for the alleged unregistered placement of securities during the ICO in 2017.

According to the suit filed this Tuesday, Kik is accused of violating the provisions of section 5 of the Securities Act of 1933, according to which the placement of securities requires registration.

“Based on the fact that Kik sold securities for $ 100 million without registering an offer or sale, we argue that the company deprived investors of information, access to which they had a legal right, and prevented investors from making decisions based on this information,” the co-director said SEC Law Enforcement Department Stephen Peikin. “Companies are not given the option of a binary choice between innovation and compliance with federal securities laws.”

“In October 2016, Kik hired an investment bank to identify companies that could acquire its business. The investment bank contacted 35 market participants and signed non-disclosure agreements with seven companies that wanted more information about Kik. By February 1, 2017, however, all seven bidders refused to buy Kik. Faced with the problem of constantly decreasing reserves and not having reliable prospects for obtaining significant profits from their current business, Kik management discussed the idea of launching a digital token as a means of raising capital. By early 2017, senior management had concluded that ICO was the only option for Kik, ”the lawsuit says.

“In an email to several employees dated February 28, 2017, CEO Kik described the new“ crypto-story ”Kik, which was supposed to be the“ new way ”of raising capital. He wrote that the company “will sell certain tokens to cryptocurrency investors in order to raise capital” and that “high demand” for these tokens will entail a “price increase”, and therefore: “Buy today, sell tomorrow, profit”. ”

According to the SEC, Kik did not hide the fact that the proposed token is an investment, and stated that he himself would make efforts to increase its value. Kik “emphasized” the limited token emission and “assured” potential investors that they would be able to trade in the secondary market, thanks to which “both Kik and early investors will be able to“ make a lot of money ”.

Earlier, Kik announced that he intends to call the SEC to court if the agency decides to apply legal measures against him, and launched the $ 5 million foundation Defend Crypto to cover possible legal costs.

The funds raised through ICO Kik used to develop their Kin token and the ecosystem based on it, in which people are supposed to be able to earn and spend cryptocurrency.

The project representative commented on the SEC lawsuit: “For the first time, we had the opportunity to gain much-needed clarity as an industry in order to continue to develop our projects.”