The US Securities and Exchange Commission (SEC) has filed a $100-million lawsuit against Kik over the messaging company’s 2017 initial coin offering (ICO), CNBC has reported.
The Canadian company conducted an ICO in 2017, earning over $100 million from the sale of the Kin token, which was designed to be the native crypto token for the Kik ecosystem. According to the SEC, however, this token sale was an illegal securities offering.
“Companies do not face a binary choice between innovation and compliance with the federal securities laws,” Steven Peikin, co-director of the SEC’s Division of Enforcement, said in a press release, as quoted by CNBC.
The watchdog accused Kik of marketing the Kin token as an investment opportunity and telling investors that increased demand for the cryptocurrency would boost its value. The regulator also cited promises that the company allegedly made, including plans to enable Kin payments in its mobile messaging service and build a system to reward other companies that adopt the token. None of that exited at the time of the ICO, according to SEC.
Kin’s value peaked in early 2018, when it reached nearly $1 billion. However, the token has seen a dramatic decline over the past 18 months. At the time of writing, the coin’s total market capitalisation stood at just over $19 million, according to data from digital currency tracker Coinmarketcap.
The SEC has previously stated that it considers all ICOs as securities, although many people involved with the sector have argued that the watchdog needs to devise new rules for the nascent asset class. Kik’s founder and chief executive officer Ted Livingston, views the latest development as an opportunity to bring more clarity on the matter.
“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,” Livingston said, as quoted by CNBC. Kik has previously stated that it intends to fight the SEC’s crackdown.
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