The popular messaging app “Kik” has made recent headlines as the Securities and Exchange Commission (SEC) files suit against the company for hosting an unregistered securities sale during the launch of an initial coin offering (ICO) of its kin token back in 2017. In its complaint
, the SEC accuses Kik of violating Section 5 of the Securities Act of 1933. The Act requires companies to register offerings of securities, which the SEC claims Kik failed to do prior to conducting their token sale. Kik allegedly sold $100 million worth of tokens to the public without registering or filing for an exemption. By doing so, the SEC claims Kik deprived investors of disclosures necessary to make an informed investment decision. Included in the SEC’s complaint is information that exposes Kik’s declining business with losses averaging $30 million a year.
A token sale can be a viable method of raising funds if done in compliance with securities laws of the jurisdictions in which investors reside. A company that fails to abide by such laws will be subject to civil penalties and can be forced to return all of the money taken from investors.
If you have raised money via a token sale or are considering conducting a token sale, contact the attorneys at Bull Blockchain Law for assistance with completing a compliant fundraise.