The U.S. Securities and Exchange Commission (SEC) is suing Kik for allegedly running an unregistered securities sale when it launched an initial coin offering (ICO) for its kin token in 2017.
In a filing submitted Tuesday, the SEC said Kik violated Section 5 of the Securities Act of 1933, which requires offerings to be registered.
“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,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
Kik has been under intense scrutiny from U.S. regulators since raising $98 million in the 2017 token sale.
Earlier this year, the company told the Wall Street Journal it planned to take the SEC to court if the agency brought an enforcement action against the project.
Last month, Kik CEO Ted Livingston said the company had already spent $5 million engaging with the SEC. Kik then launched a $5 million “Defend Crypto” crowdfunding campaign to support a potential lawsuit.
Kin is used across a suite of mobile apps. Kik has been using its ICO funds to support the development of new mobile marketplaces for people to earn and spend the cryptocurrency, which runs on its own blockchain.
In a statement Tuesday, Kik spokesperson Tanner Philp said:
“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 things.”
Brady Dale contributed reporting.
SEC image via Shutterstock
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