SEC issued $5 million penalty to KIK Interactive For Unregistered Offering

[cryptomaniac_xxx]

So here's the final judgement

The final judgment permanently enjoins Kik from violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act of 1933.  Kik is further required, for the next three years, to provide notice to the Commission before engaging in enumerated future issuances, offers, sales, and transfers of digital assets.  Kik will also pay a $5 million penalty.

https://www.sec.gov/news/press-release/2020-262

I'm not surprised though by the final judgement, although KIK tries to fight back and still have their project continue, for sure they will have a hard time moving forward. Yes maybe $5 million is not huge penalty, but if a project is struggling like KIK, it will be another black-eye.

Related thread: KIN KIK SEC - what could be the outcome?

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[btc_angela]

I mean it was really expected that it will favoured SEC right? Because KIK and the people behind really offered unregistered and security tokens based on facts and evidences. I'm expecting that the decision though might come up early, nevertheless, it's really a blow to KIK because they are really trying to comeback with all those airdrops, but it seems that it also back fired on them because the problem really die after the case against them, if I'm not mistaken the price sinks to as low as -99%, meaning it almost went to zero.

[dothebeats]

They didn't explicitly exclude US citizens from their token offerings from the get go, which prompted the SEC to launch an action against the company. Had Kik walked along that route, this shouldn't have been a problem, and they would have been operating still without any problems from the law enforcement. To be fair though, $5 million is just a small price to pay, compared to the total sale price of $55m that they have acquired from US citizens. Also within a span of 3 years, I'm sure they made more than that, and will be very happy that it's just a fine that they can get away with.

[suzanne5223]

I mean it was really expected that it will favoured SEC right?

US Sec seem to be crypto enthusiast though penalty is expected but the fund issued it a huge blow on the project because I once they have to shut down their messenger app in other to focus on the US SEC case and I think the company need to add more features on their concepts maybe it will them with the penalty fund.

[Yaunfitda]

They didn't explicitly exclude US citizens from their token offerings from the get go, which prompted the SEC to launch an action against the company. Had Kik walked along that route, this shouldn't have been a problem, and they would have been operating still without any problems from the law enforcement. To be fair though, $5 million is just a small price to pay, compared to the total sale price of $55m that they have acquired from US citizens. Also within a span of 3 years, I'm sure they made more than that, and will be very happy that it's just a fine that they can get away with.

Perhaps they didn't see it coming, If my memory serves me right, it was during the height of ICO madness and think that they can get away with it. But SEC started their witch hunt and those ICO was caught with their pants down. And we wouldn't think that they will though, I guess crypto really took off because every regulatory body is putting a close eye now. $5 million is not big and they should be happy with that, and perhaps SEC is just sending the message for future projects.

[Baofeng]

I mean it was really expected that it will favoured SEC right?

US Sec seem to be crypto enthusiast though penalty is expected but the fund issued it a huge blow on the project because I once they have to shut down their messenger app in other to focus on the US SEC case and I think the company need to add more features on their concepts maybe it will them with the penalty fund.

There are some commissioner like Hester Peirce and even the Chairman himself Jay Clayton who we might say that is a pro crypto, but it doesn't mean that they won't execute their mission, that is "to protect US investors". And that's what happened here, after a one year long batter of KIK, who have seen ups and downs on their project, the decision handed down was not in their favour. So they really have to pay that penalty of up to $5 million and move forward with their project. They are still salvaging what's left, but the case really put a big toll on the project as the prices went flat when the case against them started.

[squatter]

I mean it was really expected that it will favoured SEC right? Because KIK and the people behind really offered unregistered and security tokens based on facts and evidences. I'm expecting that the decision though might come up early, nevertheless, it's really a blow to KIK because they are really trying to comeback with all those airdrops, but it seems that it also back fired on them because the problem really die after the case against them, if I'm not mistaken the price sinks to as low as -99%, meaning it almost went to zero.

It's actually an overall victory for KIK, which the market is now reflecting. The price of KIN has nearly tripled since this happened.

Beyond the $5 million penalty, the disgorgement leaves the rest of their assets alone and doesn't force any trading restrictions on the KIN token. The SEC doesn't view the token as a security and thus, it doesn't violate securities laws. The only matter KIK was penalized for was the ICO itself.

The ruling does have some negative implications for the rest of the ICO ecosystem. It is now official court precedent -- not just SEC actions followed by settlements -- that companies can't run an ICO as a way to raise funds for a token ecosystem that doesn't exist yet, even if it will one day become a utility token.

This wasn't unexpected, though. The SEC has long asserted that legal position.

[cryptomaniac_xxx]

I was also thinking that this could have set a 'binding precedent' to all ICO past or present. And as far as I remember, there is no such case before, and this is a Canadian company, outside the jurisdiction of US, that's why this case is unique in itself. So this is a very important case for crypto industry.

[Harlot]

The problem I see here where SEC and the project devs are having a problem about classifying their own tokens I know some of them if not most will always think that what they are trying to offer in the market is a utility type of cryptocurrency but if they undergo into the howey test it will prove that their token is some kind of security under SEC's eyes, this is what happened to Telegrams' GRAM token where they thought they are just offering a normal utility token as the token only has purpose inside their app but SEC viewed it differently and cited several violations including them selling it to US citizens. For project devs I think its necessary to have a legal team included if you have decided to sell your crypto in US soil.

[btc_angela]

I mean it was really expected that it will favoured SEC right? Because KIK and the people behind really offered unregistered and security tokens based on facts and evidences. I'm expecting that the decision though might come up early, nevertheless, it's really a blow to KIK because they are really trying to comeback with all those airdrops, but it seems that it also back fired on them because the problem really die after the case against them, if I'm not mistaken the price sinks to as low as -99%, meaning it almost went to zero.

[.. snip ..]

Yeah but if you look at the charts, the project is still dead:



https://coinmarketcap.com/currencies/kin/

Although it gain, still far cry from where they've been prior to the case.

@Harlot - you have a point, I don't know if Howey's test is applicable to crypto and that SEC should be very clear about it.

[Questat]

I mean it was really expected that it will favoured SEC right? Because KIK and the people behind really offered unregistered and security tokens based on facts and evidences. I'm expecting that the decision though might come up early, nevertheless, it's really a blow to KIK because they are really trying to comeback with all those airdrops, but it seems that it also back fired on them because the problem really die after the case against them, if I'm not mistaken the price sinks to as low as -99%, meaning it almost went to zero.

[.. snip ..]

Yeah but if you look at the charts, the project is still dead:



https://coinmarketcap.com/currencies/kin/

Although it gain, still far cry from where they've been prior to the case.

@Harlot - you have a point, I don't know if Howey's test is applicable to crypto and that SEC should be very clear about it.

I think I will have to just accept the future of my investment with this coin, and I'm glad that SEC are working on the scam projects, and I hope more will complain as there's plenty of scams in the past that stolen millions of money from investors.

I'm not familiar with KIK, I though it was KICKICO,.. I'm searching in CMC but could not find it.

Anyone can you tell me where this coin.

[Harlot]

@Harlot - you have a point, I don't know if Howey's test is applicable to crypto and that SEC should be very clear about it.

Howey test is pretty straightforward really since there is 4 questions needed to passed by a certain asset in order to be labelled as an investment or a security.

1.It is an investment of money
2.There is an expectation of profits from the investment
3.The investment of money is in a common enterprise
4.Any profit comes from the efforts of a promoter or third party

If a crypto asset will simply pass this test then they will be labelled as a security rather than a utility token which the only purpose of it is just really as a payment method and nothing more than that. They have used the Howey Test for a certain time now especially about the categorization of digital assets as the confusion is prevalent in that area.

[icodrops]

Here are the latest SEC investigations: https://www.sec.gov/spotlight/cybersecurity-enforcement-actions

[btc_angela]

@Harlot - you have a point, I don't know if Howey's test is applicable to crypto and that SEC should be very clear about it.

Howey test is pretty straightforward really since there is 4 questions needed to passed by a certain asset in order to be labelled as an investment or a security.

Yes, that's why I said that if they are going to used this to test crypto related projects, then they have to update it to cover, ICO/IEO or anything that crypto is involved. Otherwise, it will be borderline cases and for sure every crypto offering will fail and will be charge by SEC.