Is Kik’s Ongoing Lawsuit Endangering the Future of Other Form D ICOs?
- Using the Form D pathway, Kik was able to raise a whopping $100 million from its “accredited investor” base.
- To date, more than 300 firms have made use of this novel fundraising method to acquire $8.7 billion worth of investments for their operational needs.
The Kik Case Could Impact Similar Projects
While Kik’s ongoing legal issues with the US Securities and Exchange Commission (SEC) may be backed by good intentions on the firm's behalf, if the decision goes against Kik, it could set a “target” on the backs of the messaging giants’ peers that have made use of a similar fundraising method in the past.
For those of our readers who may not remember, Kik had earlier initiated a Form-D filing with the SEC — thereby creating a way for the company to circumvent the regulatory body’s’ otherwise cumbersome registration process and “accept funds from accredited investors”. By doing such a thing, the company was able to lure in a whopping sum of $100 million to its coffers.
Lastly, it should also be pointed out that Kik was not the only company to make use of such a novel fundraising route — since data available on Marketwatch clearly shows that a total of 300 firms facilitated such deals in 2018 and were able to rope in a combined total of $8.7 billion during this aforementioned time period.
Upon taking a closer look at the situation at hand, we can see that the total number of Form-D ICOs have reduced quite substantially since the start of 2019. However, amongst the firms that did make use of this novel pathway were big name players like Telegram — a company that was able to raise a staggering $1.7 billion via its ICO.
As a result of this latest lawsuit, all of the firms that were able to successfully complete their Form-D filings are now anxiously awaiting the outcome of this trial since it will have a direct impact on their future as well.
In regards to this entire episode, legal expert Katherine Wu was quoted as saying:
“If Kik loses to the SEC in court, the vast majority of ICOs that raised money using similar fund-raising mechanisms could suffer negative consequences as a result.”
- As per the commentaries of a number of established crypto analysts, it appears as though Kik did not actually qualify for the “securities registration exemption” that it is now claiming.
- According to Wu, Kik’s legal team did not undertake the required KYC processes to figure out whether or not their public sale investors qualified as “accredited investors”.
- During an interview with Kik’s legal team a couple of days back, a spokesperson for the firm stated that his company had done nothing wrong and that the lawsuit would be swiftly dismissed because it “did not carry any weight to it”.
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