Kik, the Canadian startup who is already voicing its unpleasantness towards the United States Securities and Exchange Commission (SEC) for their regulatory strictness, is now being sued by the Sec for an unregistered $100 million token offering, as announced by the regulator officially on June 4.

As per the announcement, SEC claims that Kik violated the registration requirements of Section 5 of the Securities Act of 1933. Subsequently, the agency seeks a permanent injunction, disgorgement plus interest, and a penalty. The securities watchdog alleged that Kik raised $100 million through a digital token sale in late 2017, which was not registered with the proper authorities making it not compliant with U.S. securities laws 

Steven Peikin, co-director of the SEC’s Division of Enforcement, stated in the press release that Kik has “deprived investors of information to which they were legally entitled and prevented investors from making informed investment decisions,” by conducting the Kin token sale without proper registration. 

The chief of the Enforcement Division’s Cyber Unit, Robert A. Cohen elaborated that  Kik’s offering should be considered a securities offering as Kik claimed to the investors that they can except profits from its efforts to build a digital ecosystem:

“Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”

Interestingly, the SEC’s complaint follows Kik’ announcement of launching a $5 million crypto initiative to fund a lawsuit against the SEC. Ted Livingston, the CEO of Kik revealed details about the fund dubbed as DefendCrypto on May 28. 

Benjamin Sauter, a lawyer at Kobre & Kim, showed his support for Kik, stating that with the action against the SEC, Kik is providing credible arguments, pushing the regulator to “legitimate risk if it decides to follow through with an enforcement action.”

Read more: Securities Regulator Of Malaysia Registers Three Cryptocurrency Exchanges

Image source – Stock Photo Secrets