The SEC Is Suing Kik for Its 2017 ICO

The U.S. Securities and Exchange Commission is suing Kik for allegedly running an unregistered securities sale when it launched an initial coin offering for its kin token in 2017.

In a filing submitted Tuesday, the SEC said Kik violated Section 5 of the Securities Act of 1933, which requires offerings to be registered.

"By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions," said Steven Peikin, co-director of the SEC's Division of Enforcement.

As alleged in the SEC's complaint, Kik had lost money for years on its sole product, an online messaging application, and the company's management predicted internally that it would run out of money in 2017.

Earlier attempts by Kik to be acquired by a larger technology company had failed, according to the complaint.

Kik sold its kin tokens to the public, and at a discounted price to wealthy purchasers, raising more than $55 million from U.S. investors.

The SEC complaint alleges that Kin tokens traded recently at about half of the value that public investors paid in the offering.

According to the complaint, the Ontario Securities Commission previously told Kik that kin appeared to be a security.

Last month, Kik CEO Ted Livingston said the company had already spent $5 million engaging with the SEC. Kik then launched a $5 million "Defend Crypto" crowdfunding campaign to support a potential lawsuit.

Kik has been using its ICO funds to support the development of new mobile marketplaces for people to earn and spend the cryptocurrency, which runs on its own blockchain.