Let’s Go to Court? SEC Sues KIK For $100 Million ICO; Startup Raises Over $9m to Fight

Right in front of our eyes, one of the potentially decisive legal battles between regulators and the crypto industry is heating up.

On Tuesday, the United States Securities and Exchanges Commission (SEC) submitted a filing in the Southern District of New York against Canada-based company, Kik Interactive. The regulators just like in several other cases alleged that a 2017 ICO through which Kik raised nearly $100 million was a violation of the U.S securities law.

Aside from failing to register its offering, the SEC also made several other allegations regarding Kik’s operations and the nature of the token sale which the startup claimed in its defense back in December did not violate securities law.

The SEC said, among other things, that KIK was likely to go out of business at the end of 2017 if not for the public token sale. Also, the regulators claimed that startup did not have any system or services other than its failing messaging platform at the time of the token sale.

Regarding the nature of the token distribution, the SEC noted that it was all a “securities transaction” since the startup marketed the tokens as a speculative investment and even sold some at a discount to wealthy investors.

Lastly, the SEC mentioned that while KIK raised as much as $55 million from U.S investors, the – value of the Kin token – the cryptocurrency issued by KIK – recently sold at half the price for which public investors purchased the tokens.

But that is just the SEC’s side of the story.

KIK Claims It Did Not Violate Any Rules

Prior to the SEC’s latest filing, Kik CEO, Ted Livingston wrote in a reply to the SEC’s Wells Notice in November that Kik’s token sale did not violate U.S securities law since the token was a currency used within the Kin messaging platform and the startup’s ecosystem.

Kik looks determined to prove that its token sale process is not guilty as charged and that the SEC is clamping down on innovation by applying securities law to a new fundraising model.

As Coinfomania reported last week, Kik even set up a fundraising channel called “DefendCrypto” to solicit monetary support from the crypto community to fight the impending lawsuit by the SEC.

So far, Kik has raised $4,433,721 in addition to the $5 million which the company placed as a seed for the legal campaign which is likely to consume a lot of money given that it is against one of the most respected regulatory agencies in the world.

In the end, any court decision regarding the Kik Vs. SEC case would likely set a precedent for how regulatory bodies around the world will approach the crypto industry. So it would be fair to label it a make-or-break point for startups in the industry.