On Wednesday Judge Alvin K. Hellerstein of the Southern District of New York issued a final judgement in the Securities and Exchange Commission’s (SEC) suit against Kik Interactive (Kik) for the unregistered initial coin offering (ICO) of Kin tokens in 2017, which raised $100 million and purportedly violated federal securities laws.
The final judgment permanently restrains and enjoins Kik from violating Section 5 of the Securities Act. Specifically, Kik must have an applicable registration statement for its security or an exemption. Furthermore, for the next three years, Kik must give the SEC a 45-day notice before Kik participates, “directly or indirectly, in an issuance, offer, sale or transfer of any” “new ‘cryptocurrency,’ ‘digital coin,’ ‘digital token,’ or similar digital asset.” Kik will also be required to pay a $5 million penalty within 30 days of the final judgment.
In its complaint, the SEC claimed that Kik sold digital assets as securities to investors without registering the offer or being exempt from registering; as a result, the SEC averred that Kik violated federal securities laws. The final judgment comes after Kik filed for a motion for summary judgment in March and after the court granted the SEC’s motion for summary judgment in early October and ruled that Kik offered and sold securities without a registration statement or exemption in violation of the Securities Act.
“Issuers seeking to use the public markets to capitalize their businesses may not evade the registration requirements of the federal securities laws,” Kristina Littman, Chief of the SEC Enforcement Division’s Cyber Unit said in a press release. “The court’s decision recognized that Kik was engaged in a single, illegal offering of securities.”
Kik was represented by Cooley LLP and Kirkland & Ellis LLP. The SEC is represented by its own counsel.