The US Securities and Exchange Commission (SEC) has issued a $5 million penalty against Kik for launching an illegal ICO and breaking securities laws.
On Wednesday, the US regulator said that the US District Court for the Southern District of New York has entered a final judgment against Kik Interactive to lay a case to rest that has been in motion since 2019.
Last year, SEC alleged that the Canada-based messaging platform had conducted an illegal securities offering, selling "Kin" tokens, which must be registered if included in an Initial Coin Offering (ICO).
ICOs are an alternative method to raise investment into projects and have, on the whole, become associated with the cryptocurrency and blockchain space. Rather than pouring traditional, fiat currency into a startup, ICOs offer virtual coins or assets to investors.
While many organizations conduct and register ICOs correctly and legitimately, regulators have clamped down on these events in light of countless exit scams that have left investors out of pocket.
SEC has previously claimed that Kik did not register the Kin ICO before it took place in 2017, and furthermore, the Kik team apparently knew the company would run out of money in the same year. SEC says that over $55 million was raised through the coin offering, of which $100 million in securities were on offer.
The Kin token is currently worth $0.000011.
SEC said that the "court granted the SEC's motion for summary judgment on September 30, 2020, finding that undisputed facts established that Kik's sales of "Kin" tokens were sales of investment contracts, and therefore of securities, and that Kik violated the federal securities laws when it conducted an unregistered offering of securities that did not qualify for any exemption from registration requirements."
To resolve the matter, the final judgment demands that Kik informs SEC of any future issuances of digital assets for the next three years and will pay a $5 million penalty.
"This has been a long, expensive, and public battle between Kik and the SEC," Kik said. "Although we respectfully disagree with Judge Hellerstein's analysis in his ruling and were prepared to pursue an appeal, the SEC offered settlement terms that allow us to put this behind us and focus on our mission. We look forward to an exciting future for the Kin ecosystem and the millions of mainstream consumers who earn and spend Kin every month."
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Ted Livingstone, the founder of the Kik Foundation and Kik chief executive, said on Twitter that the judgment resolves all matters between SEC and Kik, adding: "there will be many more challenges ahead, but it is exciting to put this chapter behind us."
Previous and related coverage
- Kik messaging app binned to focus on Kin cryptocurrency court case
- Former Amazon finance manager and family charged with $1.4m insider trading scheme
- Shopin founder charged by SEC for running $42 million scam cryptocurrency ICO
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