The U.S. Securities and Exchange Commission (SEC) is on the tail of Kik Interactive, a social media platform who sold $100 million worth of Kin tokens between May and September 2017. According to the SEC, Kik violated the federal securities law by offering unregistered securities.
SEC Battles with Kik in the New York Federal Court
Since June 4, 2019, a case between the SEC and Kik has been brewing in the New York federal court. This is after the financial regulator claimed that the Canadian company had violated the federal securities law by conducting an unregistered securities offering. It further outlined that “Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions.”
KIK, on the other hand, had offered a trillion Kin tokens for sale in 2017 and raised about $100 million through its sale. The company argued that it is not guilty since the tokens are used within its social media platform and controlled by an independent organization. As such, they should not be classified as a security and it did not need the SEC’s permission during the ICO.
Nonetheless, the SEC has still affirmed that the token offerings were meant to be registered with the government. If this was done, then it would’ve given the appropriate disclosures to investors pertaining to the risk of the investment. It further outlined that during Kin’s ICO, the virtual asset could not be used to buy anything.