It is widely known that the US SEC does not have a great opinion about cryptocurrencies. In fact, it believes that most of them are securities, and as such - unlawful, since they do not follow security regulations. This has been a cause for numerous legal actions that the US regulator has taken against many crypto-related projects. Even so, one of the projects that the SEC is after got significantly more publicity than others — a mobile messaging app Kik.
Kik, now a disgraced mobile messaging app, has been pursued by the SEC for quite some time, and it finally decided it had enough. Kik's team, which launched the token Kin in an ICO, is now fighting back against the regulator, who still claims that Kik's token sale was illegal.
The ICO model did not see much publicity recently, which has been the situation ever since it almost went extinct during the crypto winter of 2018. As such, many newcomers to the crypto world might not know what exactly ICOs are.
Simply put, ICO stands for Initial Coin Offering, which is the equivalent of an IPO (Initial Public Offering) of the mainstream investment world. Basically, it is a fundraiser where companies looking to raise funds sell their newly-created coins to the public. Investors can buy these coins in exchange for cryptocurrencies or traditional currencies, depending on the rules of the ICO in question.
As mentioned, the US SEC believes that Kik has broken the law by holding an unregistered ICO back in 2017. The SEC has been after them ever since.
However, the Kik project's team is now fighting back. They claim that their Kin token does not fit the necessary requirements which would put them in an obligation to register with the SEC. And, if the token does not fit, that also means that the ICO itself does not need to be registered, at least as far as Kik's team is concerned.
However, Kik did not stop there. As mentioned, the SEC has been after the project, its team, and its coin for a long time now, and Kik seems to feel that the SEC has twisted the facts over this time. Essentially, the project is now accusing the regulator of lying about the Kik network.
The project has published an official 131-page-long response to the SEC's complaints, in which it also accuses the regulator of making a consistent effort to twist the facts and the truth. They said that the SEC has been taking quotes out of context, misrepresented the testimony and documents gathered in their investigation, and more.
One example of this is the SEC's claim that the Kik consultant warned the company that they needed to be registered. However, Kik officials claim that the consultant pointed out that they would have to register only in case of a community currency, which is not the case when it comes to Kin. Allegedly, the consultant pointed out that Kik is only selling units of property that the project has created and that these units are used for a particular purpose within the app.
The ICO model is responsible for a fair share of drama in the crypto world, especially back when the crypto prices were surging in 2017. Back then, a lot of scammers joined the industry at the time when investors were willing to buy anything, in hopes of making a profit. According to the SEC, most ICOs were illegal anyway, as they were selling unregistered securities. The fact that a large portion of them turned out to be scams, on top of everything else, gave the regulator quite a headache.
The SEC cracked down on ICOs, nearly leading them to extinction. However, ICOs still exists today, only in a smaller number and they are not receiving as much publicity as they did two years ago. Investors have found other methods of investing, and ICO is slowly slipping away. As for the SEC and Kik, it is unlikely that the drama will end anytime soon. With that said, there should be a formal trial in the near future, which might be able to resolve the conflict and show the world which side was right all along.
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