A U.S. District Court for the Southern District of New York has sided with the U.S. Securities and Exchange Commission (SEC) in the case against the Canadian company Kik. In his решении, Judge Alvin Kellerstein noted that it violated provisions of the Securities Act.
The SEC’s claims relate to the ICO Kik conducted in 2017. At that time, the developer of the eponymous messenger raised $98 million, after which the regulator charged him with unregistered sale of securities.
Both sides filed cross-motions for summary judgment. On September 30, Judge Kellerstein stated that Kik’s token sale meets the definition of a securities offering — participants in the ICO invested in the project in expectation of profits.
“In public statements and at events promoting the Kin token, company representatives spoke about the potential for profit,” the decision states.
The judge emphasised the unique character of the case, noting that there is no “direct precedent” to support his ruling due to the innovative nature of blockchain technology.
“I do not doubt the facts of the offer and sale of Kik’s securities without registration in violation of Section 5 of the Securities Act. Accordingly, the SEC’s claim is to be granted, and Kik’s motion is denied,” concluded Kellerstein.
By 20 October the parties must submit proposals to remedy the violation or inform the court of any disagreements.
As reported, the litigation between the SEC and the Canadian company has been ongoing since 2019. Kik chief Ted Livingston has vowed to fight the regulator “to the last dollar” even if it leads to bankruptcy.
Later the defence argued that the term “investment contract” in the Securities Act is inapt due to uncertainties in applying it to Kik’s investment scheme. The Commission’s representatives deemed the argument untenable.
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