The latter half of 2018 saw the U.S. Securities and Exchange Commission (SEC) look into multiple initial coin offerings (ICOs) and their registrations, or lack thereof. On June 4, 2019 the Commission announced the suing of popular project Kik. The Kin asset has also plunged in value.
At press time, the Kin token is down more than 30% according to CoinMarketCap, amidst action from the SEC.
In a June 4 statement, the Commission wrote:
“The Securities and Exchange Commission today sued Kik Interactive Inc. for conducting an illegal $100 million securities offering of digital tokens. The SEC charges that Kik sold the tokens to U.S. investors without registering their offer and sale as required by the U.S. securities laws.”
The SEC statement included that messaging app Kik “had lost money for years,” with funds expected to dry up by 2017. The company decided to run an ICO in 2017 and raised over $55 million in funds from Americans, according to the SEC. “The complaint alleges that Kin tokens traded recently at about half of the value that public investors paid in the offering,” the statement said.
The statement includes that Kik made the Kin asset appear as a type of investment, according to the complaint detailed. “Kik allegedly told investors that rising demand would drive up the value of Kin, and that Kik would undertake crucial work to spur that demand, including by incorporating the tokens into its messaging app, creating a new Kin transaction service, and building a system to reward other companies that adopt Kin,” the statement said.
The Commission noted Kik did not have a ready product when it sold the assets, and essentially that Kin could not be used to pay for the product/service because said product did not yet exist. Kik also specified it would retain a certain amount of funds, among other specifications. The statement pointed out that the ICO included transacting securities and that Kik needed to go through proper registration.
SEC Division of Enforcement co-director Steven Peikin explained in the statement, “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.”
SEC Enforcement Division Cyber Unit Chief Robert A. Cohen noted in the statement:
“Kik told investors they could expect profits from its effort to create a digital ecosystem […] Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”
Fall of 2018 saw SEC action against AirToken and Paragon for failing to register with the commission for their respective ICOs.
CryptoPotato Video Channel
More news for you:
Like what you read? Give us one like or share it to your friends