Kik’s Defense Against SEC Isn’t Going Well; Suffering Setbacks As Judge Tosses Vagueness Plea
Kik is still trying to build up a strong defense against the US Securities and Exchange Commission (SEC). The case is about the firm’s $100 million coin offering.
As it has been reported in October, Kik’s team of lawyers tried to persuade the New York Southern District Court to refute SEC’s claim against the Toronto-based company. SEC’s allegation that Kik violated securities laws when it sold tokens back in 2017 was voided because there’s no clear definition for what an investment contract is. Kik used this vagueness in its token offering case and also tried to depose SEC for not offering the proper guidance when it comes to token sales, during the firm’s ICO.
SEC Opposed the Claim and the Judge Sided with its View
Not at all a surprise, SEC opposed Kik’s defense by stating:
“This defense asserts that, notwithstanding 70-plus years of well-settled jurisprudence, the term ‘investment contract’ in the securities laws is void for vagueness as applied to Kik’s investment scheme. This claim is untenable and should be dismissed.”
Judge Alvin K. Hellerstein sided with SEC and didn’t grant Kik a motion for discovery. More than this, he Tuesday said a subsequent motion from Kik should be reconsidered. Destroying Kik’s void for vagueness defense he said,
“Defendant’s motion for reconsideration is a reargument of matters that were before me when I denied the discovery sought. Defendant does not mention any new matter of fact or law, or any binding precedent that I failed to consider. That is enough to deny the motion. Furthermore, as I originally held, the deliberations within an agency sheds no light on the application of the statute or regulation in issue. If the law is vague, or confusing, or arbitrary, as the defendant argues, that can be argued objectively. Proper discovery should be focused on what the defendant did, and not why the agency decided to bring the case.”
Kik’s Messaging Platform Acquired by MediaLab
MediaLab, the company that holds Whisper and many other apps, has acquired Kik’s messaging platform in October. Kik’s CEO Ted Livingstone stated that SEC’s action was what prompted the sale to happen. The latest filing on the case was made public on Tuesday. In it, SEC is asking Judge Hellerstein to allow the deposition of 7 people after the November 29th fact discovery deadline. Some of these people are Luc Hendriks, the kin app developer, the blockchain investor and author William Mougayar, and Kik’s vice-president at the time of the ICO, which was Ilan Leibovich. The Judge didn’t respond to the request yet.
Kik Started a Campaign to Fund Its Legal Battle Back in May
In May 2019, Kik launched a campaign called Defend Crypto. This campaign was supposed to fund its legal battle with SEC. At that time, Kik said that it had $5 million set aside with Coinbase for the entire initiative. After gaining the support of Arrington XRP Capital, ShapeShift and others, Kik handed Defend Crypto over to the Blockchain Association without giving further explanations.