Canadian Manufacturing

Digital token seller Kik Interactive fires back at SEC in U.S. court filing [UPDATED]

The U.S. regulator has alleged that Kik didn't provide proper disclosure of U.S. buyers in 2017 when it sold about one trillion digital tokens called Kin for US$100 million


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KITCHENER, Ont. – Kik Interactive Inc. said Wednesday it has asked for an early court date to formally challenge allegations levelled against it by the U.S. Securities and Exchange Commission that it wrongfully sold digital tokens.

The securities regulator said in a complaint filed in June that the Kitchener, Ont.-based company sold about one trillion digital tokens called Kin for US$100 million in 2017 – with US$55 million of the total coming from U.S.-based buyers – without registering their offer and sale, or providing proper disclosure, as required by U.S. securities laws.

The SEC said this constituted an initial coin offering, or ICO.

Investors based in Canada, however, were barred from buying Kin after what Kik called “weak guidance” from the Ontario Securities Commission.

The SEC alleges in its complaint that Kik lost money “for years” on its main product, an instant messaging platform called Kik Messenger, and it sought to raise money for a new type of business by selling digital tokens.

The company claims in its reply that the tokens are a currency that aren’t covered by U.S. securities laws.

Kik Interactive has said since the SEC suit was file it has looked forward to getting clarity about the legal framework around its Kin digital tokens and other cryptocurrencies.

“Our answer demonstrates how the commission has repeatedly twisted the facts to make its case, which it would not have done if it had strong evidence,” Kik chief executive Ted Livingston said in a statement Wednesday.

He previously said a blog post that Kik first heard from the SEC a few days after its token sale had already started and four months after the company first announced it. The conversation began as a “friendly” contact for information, but then ramped up and culminated with the SEC in November 2018 issuing a Wells Notice outlining why it believed there was a securities infraction, he added in the blog.

He argued in the Jan. 27 post that Kin is a currency, with “hundreds of thousands of people” having exchanged it for goods and services, but currency is excluded from the 1934 Securities Exchange Act’s definition of a security.

Kik launched a website called Defend Crypto, on which it has crowdfunded millions worth of cryptocurrency to put towards its legal fight against the SEC.

 

 

 

News from © Canadian Press Enterprises Inc. 2019

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