The Securities Exchange Commission filed a case against the Kik Messenger App for raising unregistered securities in the form of a cryptocurrency, Kin. According to SEC’s charges, Kik Messenger App was going through severe financial conditions before 2017 when it decided to conduct the ICO. This would be classified as a share issue to raise the capital within the company.
The Messenger App team raised money under their brand and even offered some at a discount initially. Hence, the SEC claims that the team must hold complete accountability of the funds like equity-based capital investment.
However, the developers of the App are defending the case on the fact that the token was designed to be used on the App by users; the company wasn’t directly involved in the utility. Hence, they stand by their claim of it being a cryptocurrency.
Why Does it Concern the Crypto-Community?
Reportedly, Kin has set aside $5 million in their Coinbase Account to meet the legal expenses of the case. However, they estimate that it might not be enough to meet the total expenses. Moreover, the result of the case will act as precedence for further trials.
Hence, a campaign has been initiated by Kin Supporters, Messari Crypto, ShapeShift, Arrington XRP Capital, and Fight For The Future to receive donations for the case. Anthony Pompliano, crypto-influencer and founder of Morgan Creek Digital, told the media,
With the disagreement comes into play on how the law applies to those facts… We just need to understand what are the rules, how they apply
The #DefendCrypto Campaign has already received a contribution worth $4.273 million. Coinbase is managing the wallet from all the donations. The funds will be used as needed after the Foundation spends the initial amount of $5 million towards the case.
However, Kik’s case seems to stand on weak grounds. Dovey Wan, analyst, and blockchain enthusiast tweeted,
The SEC doc against Kik shows the Kik team has 0 consideration of legal consequence and is lacking basic security law 101 Also ICOs that offered tiers of discount can be big problematic practice that triggers SEC security.
Moreover, the precedence set in this case would apply to a plethora of ICOs that were conducted in 2017. The fate of many cryptocurrencies hangs with the result of this case. The result is expected to clear all ambiguities regarding securities law and their extensions over cryptocurrencies.
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