The US Securities and Exchange Commission (SEC) announced that it is suing Canadian company Kik Interactive. The firm is said to have conducted an illegal $100 million securities offering of its digital tokens Kin Coin. According to the US financial regulator, the company sold its Kin tokens to US investors without registering its offering as required by U.S. securities laws.

The company was developing an anonymity-focused online messaging app. The product was at the core of the company’s ICO which concluded in November 2017. That year internal company documents revealed that it is running short on funds.

After launching its ICO to institutional and retail investors in early 2017, it managed to raise close to $100 million, $55 million of which were from US citizens. Late in May, Kik Interactive’s Kin Foundation announced that it is setting aside $5 million to fight the SEC. 

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According to the SEC, Kik Interactive marketed the Kin tokens as “an investment opportunity.” The firm claimed that it would be integrating the tokens into the messaging app. According to the US regulator, such services and systems did not exist, and the company didn’t deliver any products that could be purchased using the Kin token.

“By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions,” said Steven Peikin, Co-Director of the SEC’s Division of Enforcement.

Kin Coin History

After the total market cap of the Kin Coin reached as high as almost $1 billion in January 2018, the current total value of the coins in circulation is just below $25 million. The news comes amid an increasingly compressed ICO market.

The SEC is elaborating in its official announcement that the company claimed that it would keep three trillion Kin tokens, which would immediately trade on secondary markets. The company was aiming to profit alongside its investors from the increased demand for the token that never materialized.

“Kik told investors they could expect profits from its effort to create a digital ecosystem,” said Robert A. Cohen, Chief of the Enforcement Division’s Cyber Unit.

The SEC seeks a permanent injunction, disgorgement plus interest, and a penalty on the company. The US regulator has previously charged issuers in settled cases alleging violations of similar laws, including Munchee Inc., Gladius Network LLC, Paragon Coin Inc., and CarrierEQ Inc. d/b/a Airfox.