In the latest step in the ongoing legal battle between Canadian messaging platform Kik and the US Securities and Exchange Commission (SEC), the company has accused the governing body of wholly misrepresenting its 2017 Kin tokens ICO.
The SEC had argued that Kik’s initial coin offering (ICO), which saw one trillion Kin digital tokens offered for a total of $100m, counted as a securities sale. Under US law, securities sales need to be formally registered, which Kik had not done.
Kik has repeatedly maintained that the tokens are a currency, not a security, and so registration was not required for the ICO, leading to a lengthy and protracted legal case that culminated with the SEC suing Kik in early June.
SEC “twisted the facts” in Kik ICO case
Kik has now filed a 130-page Answer in US District Court for the Southern District of New York that accuses the SEC of dramatically mischaracterising the facts relating to the ICO case in order to bolster an otherwise weak legal standpoint.
“Our Answer demonstrates how the Commission has repeatedly twisted the facts to make its case, which it would not have done if it had strong evidence,” said KIK CEO Ted Livingston.
“Since Kin, a currency, is not itself a security, the SEC must show that it was sold in a way that violates the securities laws. The SEC had access to over 50,000 documents and took testimony from nearly 20 witnesses prior to filing its Complaint, yet is unable to make the case that Kik’s token sale violated the securities laws without bending the facts to distort the record,” added Eileen Lyon, general counsel for Kik.
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“Our Answer shows how the Commission repeatedly attempts to distract from the core issues by leveling irrelevant factual allegations solely to make Kik look bad, distorting the facts or simply making things up.”
Hail Mary or bold cryptocurrency move?
When the SEC sued Kik in June, it published a summary of accusations against the company, including the claim that Kik decided to launch the ICO as a last-ditch effort to raise capital in the face of a financial crisis. The SEC also claimed that an unnamed Kik board member described this as a “hail Mary pass”.
However, in its Answer published today, Kik claims quite the opposite.
“The SEC’s reference to a “hail Mary pass” ignores that a Kik director said exactly the opposite: ‘I think this is a great idea. People call [a cryptocurrency] a hail Mary, but to me that is a longshot and I really do not think it is a longshot.’” said Livingston.
“The SEC tries to paint a picture that the Kin project was an act of desperation rather than the bold move that it was to win the game, and one that KaKao, Line, Telegram and Facebook have all now followed.”
In publishing the Answer, Kin hopes to get the case dismissed and mark an end to a battle that waged for the last two years.
“We’ve asked for an early trial date and dismissal of the Complaint, so that we can put this case behind us and get the needed regulatory clarity the industry needs.”