Yesterday messaging app Kik filed its response to the U.S. Securities and Exchange Commission’s (SEC) complaint. In June, the SEC claimed that Kik’s $100 million ICO was an unregistered sale of securities and therefore illegal.
Kik’s 131 page Answer sets out why the firm believes the 2017 sale of its blockchain-based currency Kin was legal. While the SEC said in June that Kin tokens were more of an investment than a currency, yesterday “Kik denies any suggestion that Kik “offered or sold securities” or violated the federal securities laws in any way”.
The Canada based firm’s CEO, Ted Livingston, claimed: “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.”
Livingston is referring to the alleged misuse of quotes by the SEC in their original complaint. For instance, the Commission cited that a Kik consultant pre-warned that the ICO might be a sale of securities when they said: “unregistered public securities offerings are not legal in the U.S.”
Though Kik alleges the consultant went on to say: “In the case of a community currency, there is a good basis to argue that this is not a security. You’re just selling units of property that you created that are used for a particular purpose in your app.”
“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,” said Livingston.
His company has vocally joined the debate on whether cryptocurrencies are securities, launching the Defend Crypto fund before the SEC even sued Kik. On June 5th, the fund appeared to consist of $4 million in donated cryptocurrency, with a separate $5 million contributed by Kik for legal costs.
Though there has been some confusion. On June 28th it was clarified that Kik’s $5 million for legal fees was originally in the fund and later moved out with any crypto gains remaining in the fund. Indeed, on June 1st, the pot amounted to $5.1 million. On the 28th, after the separation, it fell to $2.1 million. As token prices have fallen, the value of the fund stands today at nearly $1.9 million. It’s still unclear how much has been donated by parties other than Kik.