The United States Securities and Exchange Commission is going to file a lawsuit against Kik a declining messaging app company in the United States due to unregistered securities offering in 2017 when the company held an ICO for its kin token.
According to the SEC, Kik was supposed to register all of its plans before making the offer, as the services or assets sold were all considered to be securities. In the United States, the sale of securities is regulated under the Securities Act of 1933, which requires registration before offerings.
The SEC mentioned that Kik managed to sell $100 million worth of their kin tokens, which weren’t even registered for taxation, therefore it could also be added to the list of charges.
The regulator believes that due to declining revenue streams for the company, it became desperate for quick capital and cashed in on the cryptocurrency craze without offering enough transparency to the users, thus exposing them to personal financial risk, which is also against US securities law. The SEC has mentioned that the company was just about to run out of funds in 2017 when they launched the ICO.
The Kin tokens are currently at half the price that they were sold for at the beginning of the ICO, therefore the company has failed to maintain the profitability of their investors, further exposing them to unnecessary financial risk. It was believed that in order to appeal to larger technology companies to be bought out, Kik had made this attempt to raise capital and showcase profitability.
Kik has been preparing for this lawsuit however, it had already launched a $5 million crowdfunding campaign named defend crypto which was supposed to be used during the lawsuit. It’s not known whether or not those funds were gathered, but it’s the perfect time to use them right now.
Should Kik be named guilty of violating federal securities laws, it will face fines in the millions. Millions that the company simply does not have.