SEC Sues Kik Inc.: Unregistered “Kin” ICO Allegations
Publicly available records provided by the Securities and Exchange Commission on June 4, 2019 indicate that the SEC has filed a lawsuit against the technology company Kik Interactive, which it alleges orchestrated “an illegal $100 million securities offering of digital tokens,” also known as an initial coin offering, or ICO. According to the SEC’s complaint, Kik Interactive failed to register its offering, as securities laws mandate, before it commenced selling them.
The SEC’s complaint alleges further that the company “had lost money for years on its sole product,” a digital messaging platform. Circumstances were so dire, according to the complaint, that Kik’s managing officers had projected privately that Kik “would run out of money in 2017.” As such, Kik strategized the launch of “a new type of business,” one it planned to fund via the offering and sale of “one trillion digital tokens,” which it called “Kin” tokens. Kin tokens were offered and sold to the public, although “wealthy purchasers” were offered a discount, according to the complaint, which states that Kik’s ICO ultimately raised “more than $55 million” from investors based in the United States. It also states that Kik’s tokens “traded recently at about half of the value” paid by public investors during the ICO.
According to the SEC, Kik represented to investors during its ICO that Kin tokens would increase in value as the result of rising demand. The company allegedly represented that it would drive demand “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 SEC alleges that during the ICO, these purported “services and systems did not exist,” and furthermore that there existed no products or services which anyone could spend Kin tokens on. Other representations made by Kik, according to the SEC, include that the company would retain three trillion coins, that the coins “would immediately trade on secondary markets,” and that the company “would profit alongside investors” thanks to the increase in demand. The SEC notes that the ICO “involved securities transactions,” and as such the company was required by law to comply with various securities registration requirements.
The Co-Director of the SEC’s Division of Enforcement, Steven Peikin, said in a 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… Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
If you or someone you know has a complaint regarding Kik’s initial coin offering of “Kin” tokens, call Fitapelli Kurta at 877-238-4175 for a free consultation. You may be able to recover lost funds. Fitapelli Kurta accepts all cases on contingency: we only get paid if and when you collect money. You may have a limited window to file your complaint, so we encourage you to avoid delay. Call 877-238-4175 now to speak to an attorney for free.