Kik and the United States’ Securities Exchange Commission (SEC) have proposed a joint settlement in the matter of Kik’s 2017 initial coin offering (ICO). Kik has agreed to pay a $5 million penalty to the commission.
The judgment Kik agreed has to requires the company to $5 million to the commission.
The final judgment issued by the US District Court for the Southern District of New York, which Kik has agreed to, orders that Kik is “permanently restrained and enjoined” from violating Section 5 of the Securities act. The judgment also orders Kik to pay a civil penalty of $5 million to the SEC within 30 days of the final judgment.
The order also states that Kik must give the SEC 45 days’ notice before it sells or issues any cryptocurrency, digital tokens, or any assets issued using distributed ledger technology over the next three years. The judgment noted that Kik does not need to seek the commission’s approval or consent prior to issuing, offering, selling, or transferring cryptocurrencies.
According to a court document, the final judgment still requires ratification from the judge presiding over the case.
The judgment comes less than a month after the US District Court for the Southern District of New York ruled in favour of the SEC, which claimed that Kik Interactive Inc. violated securities law by failing to register the 2017 distribution of its Kin tokens.
Kin began as a cryptocurrency token issued on the public Ethereum blockchain through Kik. The launch of the currency marked a major pivot in Kik’s strategy after the company faced increased competition from larger social networks like Facebook.
Earlier in October, Kik founder Ted Livingston stated his disappointment in the ruling, noting that Kik was considering an appeal.
RELATED: Kik chat app shuts down as company goes “all in” on Kin
Kik’s general counsel, Eileen Lyon, also called for the SEC to “engage in proper rulemaking” to provide clarity to companies like Kik. Kik has waived any right to appeal the final judgment.
“The ruling may raise more questions than it answers since it applies only to our original token distribution,” Lyon said at the time. “The SEC should engage in proper rulemaking, including the opportunity for public commentary, rather than force our industry to hunt for regulatory clues among the SEC’s conflicting statements, Commissioner and staff speeches, no-action letters, closed-door meetings with the SEC, and nonprecedential settlements.”
The ruling from the US district court follows a long and public battle between Kik and the SEC, which began in 2017 after the SEC started to investigate Kik for its $157 million CAD token offering.
The SEC’s pursuit of Kik led to the initial shutdown and eventual sale of Kik’s app and the acquisition of its employees, late last year.