(BlockBar) The U.S. Securities and Exchange Commission (SEC) is suing Kik for ‘allegedly’ running an unregistered securities sale. According to SEC, Kik violated Section 5 of the Securities Act of 1933, which requires offerings to be registered. Kin’s (KIK’s digital asset) price tanked, losing more than 25 percent within two hours of the lawsuit’s announcement.
Co-director of the SEC’s Division of Enforcement Steven Peikin 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 sought to pivot to a new type of business, in early 2017, which it financed through the sale of one trillion digital tokens. The company sold its kin tokens to the public and to wealthy purchasers at a discounted price. It raised more than $55 million from U.S. investors. In reaction to this SEC complaint that kin tokens traded recently at about half of the value that public investors paid in the offering.
The Ontario Securities Commission previously told the Waterloo, Canada-based Kik that kin appeared to be a security. Kin is used across a suite of mobile apps. It has been using its ICO funds to support the development of new marketplaces for people to earn and spend the cryptocurrency.The cryptocurrency runs on its own blockchain. In a statement, Kik CEO Livingston said, “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.”
Earlier this year, the company told the Wall Street Journal it planned to take the SEC to court if the agency brought an enforcement action against the project. Last month, Ted Livingston said the company had already spent $5 million engaging with the SEC. Kik then launched a $5 million “Defend Crypto” crowdfunding campaign to support a potential lawsuit.