The U.S. Securities and Exchange Commission sued Kik Interactive Inc. Tuesday for illegally raising $100 million through a 2017 initial coin offering, in one of its highest profile cases targeting a crypto firm for not registering a token sale with the regulator.
After losing money for years on its sole product, an online messaging application, Kik raised more than $55 million from U.S. investors by selling a digital token called Kin without the proper disclosures, the SEC said in a Tuesday court filing. The agency is seeking unspecified monetary penalties.
“Companies do not face a binary choice between innovation and compliance with the federal securities laws,” said Steven Peikin, co-head of the SEC’s enforcement division.
Kik was among the biggest ICOs in the past two years and has prominent backers. Venture capitalist Fred Wilson has defended the Kin digital currency in a blog post, saying it is not a security.
Kin recently launched a crowdfunding site called DefendCrypto.org to raise money to fight back against an SEC investigation into the firm, and the agency’s broader crackdown on ICOs. On the site, Kin says it has raised $4.8 million to resist SEC actions “that set a dangerous precedent and stifle innovation.”
An attorney for Kik didn’t immediately respond to a request for comment.
The SEC has been sounding the alarm over ICOs for years, arguing that the sales are likely securities that must comply with federal securities rules. The regulator has warned individual investors of the risks in buying the tokens, cautioning that scammers might be using them to lure investors into frauds.
This article was provided by Bloomberg News.