The US Securities and Exchange Commission UU (SEC) is suing the Kik messaging application for its initial currency offer of 2017 that raised $ 100 million. Bloomberg reports that the SEC believes that the tokens issued in the sale, called Kin, count as collateral and, as a result, the sale should have been registered with the government agency. If it wins, the SEC could force Kik to offer its investors their money back.
At one time, Kik was an important messaging application in the United States, and was especially popular with children and teenagers. Unfortunately, this popularity contributed to the fact that it became the "de facto application" for child predators, according to a report published in 2017. As it lost users and its revenues decreased towards the end of the year, the SEC alleges that the company tried to use ICO as a "hail Mary pass" to reverse his fortune. At the time, Kik said his goal was to create a platform for application developers and users, which allows them to pay each other using the decentralized currency.
Kik has welcomed the demand. "What excites me is that this industry will finally get the clarity it desperately needs," said its CEO, Ted Livingston, The Wall Street Journal . The company recently created a collective funding campaign called DefendCrypto.org to raise funds for its legal defense, which has raised $ 4.3 million in donations from supporters at the time of publication.
The SEC uses what is called the "Howey test" to determine if the tokens of an ICO count as a security. In simple terms, if the value of a token is based on the prospects of a single company, it is likely to be a security; if it is sufficiently decentralized, then it probably is not. In 2017, the SEC concluded that the ICO of the Decentralized Autonomous Organization (DAO) was a security that used this test, while the Ethereum tokens are decentralized enough to not do so. In reference to this test, last year, the SEC launched a fake ICO called "Howey Coin" to warn people about the dangers of unregulated ICOs.
In response to the SEC announcement, Kin's value has plummeted by more than 30 percent in the last 24 hours.