Judge Rules Kik’s 2017 $100M ICO Sale of KIN Is An Illegal Unregistered Securities Offering

A US district judge for the Southern District of New York agreed with the SEC”s assessment that the $100 million initial coin offering (ICO) of Kik in 2017 was a securities sale.

Judge Alvin Hellerstein ruled that Kik violated the Securities Act by selling its unregistered token called “Kin.”

The judge relied on the three elements of the Howey test to determine if the token was security.

“Kik concedes that its issuance of Kin through the Token Distribution Event (TDE) involved an investment of money by which participants purchased or acquired Ether and exchanged Ether for Kin,” With this, the first element of the Howey test was satisfied, and so did the other two about which the parties disputed, the judge wrote.

Other elements held as Kik promoted Kin’s profit-making potential in public and established a common enterprise by depositing investors’ money in a single bank account.

Besides Kik, the last day of the quarter also saw the SEC declaring the sale of Salt tokens in a $47 million ICO, an unregistered security, and ordered to refund the amount to investors.

In the past, the SEC also fined Block.one, the company behind EOS $24 million for its biggest ever $4 billion unregistered ICO. Telegram has also been ordered to return more than $1.2 billion to investors, along with paying an $18.5 million civil penalty.

Kik CEO Ted Livingston, however, has declared to fight back the SEC's decision. “We are obviously disappointed in this ruling,” Livingston said in a statement.

“We are considering all of our options, including filing an appeal.”

He said they always protect investors and take compliance seriously as such, retained sophisticated counsel to analyze the law before the public sale of a Kin, as such, believe it to be a “functional currency and not a sale of securities.”

Despite the SEC negotiating with them for 18 months to come to an agreement, the agency took them to court unless the company agreed that the Kin sale was a security, he said.

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