In the SEC handbook, if you don’t know what something is………just sue. Way, WAY back in 2017, Kik (an online messaging app) did an initial coin offering (ICO) and raised $100 million from investors. At the time, the SEC had just begun noticing that ICOs were being used to raise capital but didn’t know exactly what they were, or how to define them. So, after a couple years of research they decided that ICO’s were securities and therefore they should be regulated by………ta da………the SEC (surprised?). Quoting the SEC;
“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,”
So, the SEC is now suing Kik and may require them to return all the investor’s money (noting that when they announced the suit the tokens dropped 25% within hours, thus causing investor losses). Kik intends to fight the SEC action (remember, there were no regulatory guidelines when the offering was done) BUT, taking the high ground, Kik’s CEO Ted Livingston 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.”
Maybe the SEC will actually decide on regulations that protect AND benefit all parties. Oh, and if you own Tesla you have been fully informed and if you lose money (yeah, possible) don’t go to the SEC for remedy. See more below.
Bill Taylor/ Fintek Capital
“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 in the Southern District of New York, 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.”
As alleged in the SEC’s complaint, Kik had lost money for years on its sole product, an online messaging application, and the company’s management predicted internally that it would run out of money in 2017. Kik’s losses averaged about $30 million a year, according to the SEC, and earlier attempts by Kik to be acquired by a larger technology company had failed, with seven potential suitors all declining to buy or merge with the company…”