SEC Demands $5 million fine in KIK’s $100 million ICO case and the parties reportedly agreed to settle on the penalty as we are reading more in today’s crypto news.
The US Securities and Exchange Commission- SEC demands $5 million in fines as a proposal to the New York court that messaging app company KIK should pay for holding a $98 million ICO for the Kin crypto network. The US District Court Judge Alvin Hellerstein sided with the agency in the lawsuit against the crypto company at the end of September.
The proposed penalties are yet to be ratified by the judge and they will require Kik to wire the SEC $5 million with 45 days notice before it starts another token sale. The penalty seems that it didn’t force Kik to return the $98 million raised in the 2017 ICO to investors as the attorneys didn’t respond for comments requests.
The SEC filed the lawsuit back in 2019 and it alleged that its ICO constituted an illegal securities sale which Kik didn’t register with the SEC. Kik denied this and argued that the token sale was not a securities sale and that the purchase of Kin didn’t constitute an investment contract as people purchased it for their utility not for speculative purposes as the company argued.
The case went on and on which almost bankrupted Kik. The company fired about 80% of its workforce and sold itself to a bigger company that introduced ads to the platform. The company fundraised $5 million in 201 through a “defend crypto” campaign to help the cause as the CEO Ted Livingston said at the time that the funds will also be used to defend other ICO-funded crypto startups from the SEC. Now, the $5 million seems to be the right amount to set the issues with the SEC.
The settlement is somewhat unusual as the SEC reached deals with other crypto companies over ICOs with Block.One which raised $4 billion in ICO for the blockchain network EOS but ended up only paying $24 million to the SEC when it reached the deal in October 2019. Telegram paid $18.5 million for the $1.7 billion ICO reaching a deal in June 2020.
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