Kik has officially filed its response to the U.S. Securities and Exchange Commission (SEC) lawsuit filed against the Kitchener-based company in June.
In the 130-page document, Kik offers a detailed, and seemingly aggressive, response to a number of allegations brought against the company by the SEC, which alleges that Kik violated securities laws by selling Kin tokens to US investors in 2017 without registering the token as a security.
Kik denies all allegations from the SEC’s suit and argues that the SEC misrepresented quotes and evidence in the case.
In its response, Kik denies all allegations from the SEC’s suit and argues that the SEC misrepresented quotes and evidence in the case. In its three page long introduction Kik points to three quotes that the SEC used in its filing that appear to have been taken out of context and used to support its findings. The document also offers detailed responses to each of the SEC’s allegations.
“Since Kin, a currency, is not itself a security, the SEC must show that it was sold in a way that violates the securities laws,” said Eileen Lyon, Kik’s general counsel, in a recent statement. “The SEC had access to over 50,000 documents and took testimony from nearly 20 witnesses prior to filing its Complaint, yet is unable to make the case that Kik’s token sale violated the securities laws without bending the facts to distort the record.”
“Our Answer shows how the Commission repeatedly attempts to distract from the core issues by leveling irrelevant factual allegations solely to make Kik look bad, distorting the facts or simply making things up. Accordingly, we have taken the unusual step of explaining in our comprehensive Answer why the SEC’s multitude of misrepresentations are incorrect.”
Kik first heard from the SEC in September 2017, after it officially launched Kin cryptocurrency and stated plans to raise $157 million CAD through an initial coin offering (ICO), just weeks after the SEC issued a notification that ICOs could constitute an illegal offering. In September, the US agency sent Kik its first inquiry, and later a subpoena in January 2018. This subpoena was followed by eight more over the first half of 2018 and 10 testimonies, with the SEC officially filing its suit in June of this year.
In May, Kik launched a “Defend Crypto” fund to take on the SEC, committing $5 million in Bitcoin, Ethereum, and Kin. Since then, the fund has evolved into a way to financially support “other projects outside of Kik” that are also “impacted by the regulatory uncertainty.” Kik has moved its $5 million into a separate account to support its own fight, leaving in the fund around $1.6 million that had been raised by outside sources, which will now be governed by the Blockchain Association.
Earlier this year, Ted Livingston, the founder of Kik and Kin, told BetaKit he was confident in winning the case, calling it precedent-setting for the entire industry. He argued, however, that if Kik were to lose the case “it would be disastrous for the cryptocurrency industry.”
Livingston noted in Kik’s most recent statement that the company has asked for an early trial date and dismissal of the SEC’s complaint.
“Importantly for developers, it is clear from the SEC’s lack of action against the Kin Foundation that the transactions currently taking place within the Kin Ecosystem do not fall under the federal securities laws,” he stated. “We’ve asked for an early trial date and dismissal of the Complaint, so that we can put this case behind us and get the needed regulatory clarity the industry needs.”