The U.S. Securities and Exchange Commission (SEC) is suing Canadian crypto startup Kik in relation to the company’s unregistered token offering that raised $100.
The regulator formally announced its decision to go to court on Tuesday, June 4.
The SEC says that Kik violated a requirement in the Securities Act of 1933 concerning the registration of securities. As such, the watchdog wants the courts to issue a permanent injunction against the firm, as well as disgorgement and interest. The SEC is also seeking for a penalty against the Canadian startup.
The U.S. regulator maintains that Kik’s 2017 digital token sale that raised $100 million did not comply with set U.S. securities laws. Specifically, the watchdog said Kik did not register the token offering with the appropriate authorities.
According to Steven Peikin, of Division of Enforcement at SEC, Kik’s sale of the Kin token disadvantaged investors by depriving them of information they had to legally access. The result was that it investors were not able to make “informed investment decisions.”
The Enforcement Division’s Robert A. Cohen, who heads the Cyber Unit, said that the Kin token as sold by Kik is a securities offering. He noted that Kik informed investors about the potential for profits that would arise from the team’s efforts.
The SEC’s announcement that it had sued the tokenized social media platform comes only weeks after Kik launched a $5 million crypto initiative that it said would help it bring a lawsuit against the securities regulator.
Announced on May 28, the initiative was under a project dubbed “DefendCrypto.” Kik Chief executive Ted Livingston called on the crypto community to rally behind the initiative to help compel SEC to offer much more regulatory clarity.
SEC has in the past said that any token sale that promises profits to investors passes the Howey Test and ought to be registered as a security.