Kik and The SEC Reach a $5 Million Agreement to End Their Long-Lasting Legal Battle

The story of the legal battle between Kik and the SEC seems to be coming to an end. Today, the SEC filed a motion with the Southern District Court of New York to close the case with a $5 million fine.

Kik was sued for issuing and selling unregistered securities through the ICO of its KIN token. The accusation came just in the same time the SEC tried similar proceedings against Telegram’s ICO, TON.

However, the agreement with Canada’s Kik is much softer than what the SEC pursued with Telegram: The latter was prohibited from keeping up with the project, whereas Kik is required to notify the SEC of any action involving sale or exchange of assets.

Kik and The SEC Agree to Disagree

Kik accepted the settlement, which has not yet been approved by the New York court. If the litigation goes forward, the parties would be disputing close to $100 million plus the related administrative expenses and miscellaneous legal fees.

The parties agreed to this amount as a one-time payment under a civil penalty:

IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant is liable for a civil penalty in the amount of $5,000,000 pursuant to Section 20(d) of the Securities Act [15 USC § 77t(d)]. Defendant shall satisfy this obligation by paying $5,000,000 to the Securities and Exchange Commission within 30 days after entry of this Final Judgment.

This marks the end of a dark chapter in the history of the crypto ecosystem. In one year the SEC went through  a long period of hard litigations, criticism, and resources. On the other hand, KIK lost $10 million in fees, had to sell its messaging app, and lay off nearly 80% of its staff.

What happened?

It all started with the Canadian startup’s decision to venture into the crypto-verse in the middle of the ICO hype.

The company announced the issuance of one trillion KIN tokens as part of an ICO for a blockchain that promised to natively increase the features of several social media apps (people could vote, tip, pay, and participate in contest all within their apps).

The SEC quickly tried to put its hands on the project, claiming that by offering KIN tokens, Kik was taking part in an unregistered securities sale scheme. In general terms, the SEC demanded the suspension of such action and the seizure of the funds obtained from this allegedly illegal activity.

Kik objected. Its fundamental argument was that users bought the KIN tokens for their potential use at the time of the network’s launch instead of merely being interested in speculating on its price.

This was key to the controversy. The Howey test —a standard procedure for determining whether or not something is a security— concludes that a product is considered a security if its primary objective was to make a profit through price speculation. But it was impossible to know the company’s intentions —let alone the investors’— so a meticulous analysis of the issue was required, and Kik was willing to fight to the end.

So, now that the legal fight is about to end, crypto enthusiasts can only hope the legal fight didn’t end Kik

The post Kik and The SEC Reach a $5 Million Agreement to End Their Long-Lasting Legal Battle appeared first on CryptoPotato.

Publication date: 
10/21/2020 - 02:00

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