The U.S. Securities and Exchange Commission has sued messenger app maker Kik for its $100 million ICO - which the agency contends was an unregistered securities sale - and the regulator appears to have built up a strong case in its initial court move.
In a complaint filed Tuesday, the SEC alleged that Kik violated federal securities law by not registering its kin token sale.
Nelson Rosario, a principal at Smolinksi Rosario Law, told CoinDesk that the SEC's complaint against Kik was similar to others brought against other initial coin offerings, in particular with respect to the evidence that the regulator is putting forth.
"Obviously this is a very sophisticated kind of token offering, done by a company that was already established but [the] kind of evidence that the SEC brought to bear is very much the same that it's brought against [other ICOs]," he said.
"The Kik action is significant because it represents the SEC's first enforcement action for a pure regulatory violation - that is, a case where a token issuer simply failed to register with the SEC based on its good faith interpretation of the law."
Drew Hinkes, an attorney for Carlton Fields and general counsel to Athena Blockchain, said the SEC included a great number of facts in its case.
"Seems like there's a lot of strong facts in the SEC's favor now the issuer gets to argue the law."
Kik essentially told the SEC that it should sue by making the SEC's Wells Notice and its subsequent response public, Chervinsky said.
"By publishing its Wells response, Kik essentially threw down the gauntlet and challenged the SEC to file suit. The fact they did so today shouldn't surprise anyone. Kik got what it wanted: a fight in open court instead of behind the SEC's closed doors," he said.
A court or jury may not read the complaint as a scathing indictment, and it is entirely possible that Kik and the SEC will come to a settlement prior to reaching a jury trial.
The SEC Case Against Kik's ICO Appears Strong, Experts Say
Published on Jun 5, 2019
by Coindesk | Published on Coinage
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