SEC Sues Kik Over Unregistered $100 Million Cryptocurrency Sale
U.S. regulators file a lawsuit against messaging app Kik for conducting an illegal $100 million token sale without proper registration. The agency claims the company marketed the tokens as an investment rather than a functional currency.
The Securities and Exchange Commission sues Kik Interactive over its 2017 $100 million digital token sale. The regulatory agency accuses the messaging company of selling unregistered securities to U.S. investors. This lawsuit expands the SEC's ongoing crackdown on cryptocurrency companies that bypass federal registration requirements.
According to the complaint, Kik faces severe financial troubles as its chat application steadily loses money. To survive an expected 2017 cash shortfall, the company creates and sells one trillion "Kin" tokens. The SEC highlights that Kik promotes these tokens directly as an investment opportunity, promising investors that rising demand drives up the token's value.
Central to the SEC's argument is the fact that Kik lacks the promised ecosystem at the time of the sale. Features like a Kin transaction service and a rewards system do not exist yet when the company raises the funds. Regulators state that Kik deprives investors of legally required information, emphasizing that companies must comply with federal securities laws even while pursuing technological innovation.