It’s been a saga but the US Securities and Exchange Commission (SEC) has fined Canadian messaging app company Kik $5 million for conducting an illegal $100 million securities offering of digital tokens.
The regulator says a federal district court has entered a final judgment on consent against Kik Interactive to resolve the SEC’s charges that its unregistered offering of digital Kin tokens in 2017 violated the federal securities laws.
Kin works by letting users earn from watching adverts or completing surveys, which they then spend on the platform. Kik’s argument was that this does not fit the definition of a security.
Kik had been kicking back against this case for a while. For example, last year it launched a crowdfunding campaign to support its court battle.
The firm also accused the SEC of “repeatedly twisting” the facts of the case. In August 2019 the Financial Times reported on Kik’s lengthy 131-page response to the SEC’s complaint.
Kik said the watchdog had made “a consistent effort to twist the facts” by citing quotes out of context and “misrepresenting the documents and testimony that the commission gathered in its investigation”.
In the SEC announcement yesterday (21 October), it notes that Kik did not qualify for any exemption from registration requirements. The court further found that Kik’s private and public token sales were a single integrated offering.
The final judgment permanently enjoins Kik from violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933. Kik is further required, for the next three years, to provide notice to the Commission before engaging in enumerated future issuances, offers, sales, and transfers of digital assets.
In a statement, Kik says: “This has been a long, expensive, and public battle between Kik and the SEC. Although we respectfully disagree with Judge Hellerstein’s analysis in his ruling and were prepared to pursue an appeal, the SEC offered settlement terms that allow us to put this behind us and focus on our mission.”
On Twitter some see this news as yet another victory for the SEC over an initial coin offering (ICO) issuer. However, some of Kik’s supporters saw it as a win for their team.
One comments: “All sorted. Thanks Judge Hellerstein! Now that the brakes have been released, it’s time to accelerate the growth of the Kin Ecosystem.”
Another notes: “Mixed feelings! KiK lost the case against the SEC so still no clear guidance for crypto in the US (sad) but $KIN can still operate and is left unharmed! (Yey!) – that’s the ending of that 2y long case.”