Watch: Why This Video Could Doom Kik’s SEC Fight

… Kik a “Wells submission,” a prelude to suing the Canadian company for violating securities regulations via its nearly $100 million initial coin offering.

Kik CEO Ted Livingston may have already doomed the chat app’s chances to win its high-profile legal battle with the US Securities and Exchange Commission (SEC) regarding its Kin cryptocurrency, a video uncovered by The Block suggests.

Kik’s SEC Gambit

SECSEC

Kik plans to fight the SEC’s charge that the Kin ICO was an illegal securities offering. | Source: Shutterstock

As CCN reported, the SEC has sent Kik a “Wells submission,” a prelude to suing the Canadian company for violating securities regulations via its nearly $100 million initial coin offering.

The letter from the SEC reads, in part:

This proposed action would allege violations of Sections 5(a) and 5(c) of the Securities Act. The recommendation may involve a civil injunctive action and may seek remedies that include a preliminary and permanent injunction, disgorgement, pre-judgment interest, and civil money penalties.

Kik has an opportunity, before the SEC files any formal litigation, to explain to the SEC why it should not investigate them. They did so on December 10.

Kik’s Wells submission implies that the SEC is going out of bounds by even considering action against Kik.

The Staff has never suggested to us that offers or sales of Kin involved any fraud or other intentional misconduct. As such, the issue in dispute is whether any sales or transfers of Kin amounted to offers or sales of a “security” – in other words, whether sales or transfers of Kin are within the scope of the Commission’s regulatory authority at all. For the reasons discussed below, we believe the proposed enforcement action would exceed the Commission’s statutory authority and, as such, would fail.

The Video That Could Foil Kik’s Argument

However, in a video from 2017 uncovered by The Block, Livingston advertises the potential investment returns from the Kin token. At that point, Kin was still in the ICO stages of crypto-asset development.

Howey Test

Simply having value doesn’t make a crypto-token a security. The so-called “Howey Test” applies to tokens the same as to other asset classes. The Howey Test primarily deals with the nature of asset investment. In the words of Frank Murphy, the US Supreme Court Justice who essentially created the test:

The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.

There are four parts to the Howey test.

  • An investment of money exists.
  • The enterprise must involve multiple parties.
  • There must be an expectation of profit or appreciation of the investment.
  • The effort that makes money must be the effort of others.

Falling under these four categories can make you the subject of SEC enforcement. It’s a tricky game to play, raising money. Securities must register, as outlined by the Securities Act. The part that Livingston may have fore-doomed in the above video is the expectation of profit.

A Utility-Security Hybrid?

kin cryptocurrencykin cryptocurrency

Source: Shutterstock

Utility tokens perform a function. A security can double as a utility. The topic is very confusing when the many capabilities of blockchains are introduced.

Livingston says in the video:

We’re gonna put [the Kin cryptocurrency] inside Kik and it will become super valuable on day one, we think.

Coming from the CEO of the company offering the asset, that looks an awful like suggesting that people should expect profit.

If the SEC investigates Kik, it will be the largest company to face a blockchain-related securities suit yet. The fallout could be minimal for a company with as much money as Kik, or it could be devastating.

In either case, at time of writing the Kin token had a dollar value of just $0.000027 and a market capitalization of around $20 million. It had seen a more than 1% rise over the 24-hour period. One wonders how the potential SEC case will affect the token.

Featured Image from TechCrunch/Flickr

Creating value online? Kin cryptocurrency could be for you

Like traditional cryptocurrencies, Kin is stored in a cryptocurrency wallet. This wallet will be linked to users’ Kik accounts. You do not need to download …

The Kin cryptocurrency allows developers to integrate Kin into their mobile games, and rewards developers for taking part in and expanding the Kin ecosystem.

The Kin Foundation is a non-profit governance body for the Kin cryptocurrency. It also oversees the Kin ecosystem on issues relating to the development of the Kin Rewards Engine. The Kin Foundation is also responsible for monitoring membership and security and ensuring the ecosystem transitions smoothly into a decentralised model – one that is separate from the messaging app Kik. Kin was created by the team behind Kik.

The Kin Foundation rewards select developers for the successful launch of Kin-powered features in consumer applications. If developers are successful, they will receive a reward in the shape of fiat or cryptocurrency. However, Kin also rewards stakeholders in the Kin ecosystem, not just developers.

The Kin website states that Kin is amongst the top 10 most used cryptocurrencies in the world, with more than 6 million users that generate a peak of 200,000 daily transactions.

The Kin Rewards Engine

The Kin Rewards Engine is essentially a profit-sharing mechanism. All stakeholders will benefit from the organisation’s growth. It functions by locking in a majority of the Kin cryptocurrency. This will be capped at 60% of the total supply and will be distributed amongst contributors.

Each year, 20% of the remaining funds that have not been allocated will be offered as additional incentives to anybody who has made a contribution to the ecosystem. A further 5% of the rewards stash will be utilised in the operations and marketing departments. Kin aims to be transparent, and as such, will allow anyone to see how the funds are spent.

The Kin cryptocurrency is deflationary

Furthermore, the Kin cryptocurrency is deflationary. This means that over time it will increase in value rather than decrease like fiat currency. However, the percentage of rewards available will decrease in tandem with Kin’s growth in value.

The rewards will be distributed in proportion to the total usage. To ensure this, Kin will employ an algorithm which determines the reward allocation to each user based on how much Kin they have generated.

To begin with, this will be achieved manually by the Kin Foundation, but over time the process will become automated through the use of smart contracts. A smart contract is a special type of contract written into the code of a blockchain, and will only ever be executed once all parties have upheld their side of the deal.

How can you earn Kin?

Users can earn Kin simply by engaging with the consumerism of the ecosystem. For instance, if a user contributes value to the community, they can earn Kin. Or, if a user curates another person’s content, they can likewise earn some Kin. And, as stated above, if developers create their own content, they will also earn some Kin.

Like traditional cryptocurrencies, Kin is stored in a cryptocurrency wallet. This wallet will be linked to users’ Kik accounts. You do not need to download any other pieces of software, nor do you need to bother with wallet addresses. This is because Kin has integrated its services into the Kik social messenger experience.

If you simply want to send or receive Kin, you can do so through the Ethereum blockchain. This is possible because the Kin cryptocurrency is an Ethereum ERC-20 compatible token.

The Kin SDK

Kin has also released a Software Development Kit (SDK) that is now live on the Unity Asset Store. Unity is an incredibly popular game engine that has been used to build games such as Pokémon Go.

Prime31 is the development team behind the Kin SDK. The SDK enables developers to open fresh Kin accounts and create new Kin wallets, and offers a way for users to earn and spend Kin in-game. For players, you will also be able to engage in user-to-user interactions. This includes sending Kin to other players.

Developers utilising the SDK will be able to design games using Kin as well as facilitate peer-to-peer transactions. For developers who are not well versed in blockchain, the Kin SDK is developed in a manner that does not require you to have a deep understanding of blockchain technology.

The Kin developer program accounts for 29 out of 33 applications in the Kin ecosystem. Previously, those 29 applications provided Kin with more than 40,000 users to their ecosystem. If you wish to join the Kin developer program, the deadline is March 26th 2019. To apply, developers must submit creative ideas for Kin-powered experiences.

As of writing, the Kin SDK is only available on Android devices, but Kin has plans to release the SDK on iOS devices in future.

For more information and guides from Coin Rivet, click here.

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Report: Kik Plans to Battle Expected SEC Enforcement Action Regarding $100 Million ICO

Kik has also raised money from big VCs such as Foundation Capital, RRE Ventures, Spark Capital, SV Angel, Tencent, Union Square Ventures, and …

In a report this past weekend, Kik – a Canada based company, indicated its intent to battle an anticipated enforcement action by the US Securities and Exchange Commission (SEC). According to WSJ.com, Kik is willing to go to the mat with the Commission in the debate as to whether or not their initial coin offering (ICO) represents an unregistered security.

In 2017, Kik raised a whopping $100 million in an ICO. The token issuance was well subscribed as reportedly over 10,000 individuals from 117 countries purchased the “Kin” token. Kik has also raised money from big VCs such as Foundation Capital, RRE Ventures, Spark Capital, SV Angel, Tencent, Union Square Ventures, and Valiant Capital Partners.

Kik is a chat platform built for teens. The company seeks to become the “central hub for everyday life for teens across the world as [they] grow.” The Kin token may be used in the Kin Marketplace where you can both earn and spend Kin.

The report references a discussion with Kik CEO Ted Livingstone and his intent to fight the looming enforcement action.

SEC enforcement actions at first targeted blatant acts of ICO fraud. But more recently, these enforcement actions have focused on allegations of sales of unregistered securities. The SEC utilizes the rather broad “Howey Test” to determine whether or not a crypto is a security. The SEC has publicly stated that Ethereum is not a security but did not declare whether or not it would have been considered a security at the time of issuance. A portion of the debate centers around the concept of decentralization and control. If the crypto displays insufficient decentralization, the SEC may be more inclined to label it a security.

Companies that are deemed to have issued unregistered securities may be compelled to do a recession for investors while paying substantial fines. The SEC pursued this path with two ICOs: Paragon and Airfox.

The legal battle may help define the future of utility tokens – a concept that has waned as regulators attribute the definition as little more than a snipe hunt. There is draft legislation in Congress that may put the question to rest – if it ever becomes law.

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Kik Plans to Challenge the SEC in Court Over Its KIN ICO, According to Report

The KIN initial coin offering brought in approximately $100 million dollars. In terms of price, KIN has followed the majority of the cryptocurrency market …

According to Kik CEO Ted Livingston, the SEC claims the KIN token sale constituted an unregistered securities offering. Kik, on the other hand, claims KIN is a utility token that shouldn’t be subject to securities regulations.

In October last year, the SEC announced it had settled charges with Airfox and Paragon for holding unregistered securities offerings. Both projects agreed to pay a fine, register their tokens as securities and offer a reimbursement option to participants in their ICOs.

SEC chairman Jay Clayton has previously stated that he believes every ICO he has seen constitutes a securities offering. If Kik does indeed go ahead with challenging the commission in court, the case could prove to be extremely important for all projects that held an ICO or are planning to conduct a token sale in the future. WSJ cites a rebuttal written by Kik’s lawyers:

“Bringing the proposed enforcement action against Kik and the foundation would amount to doubling down on a deeply flawed regulatory and enforcement approach.”

The KIN initial coin offering brought in approximately $100 million dollars. In terms of price, KIN has followed the majority of the cryptocurrency market in 2018, losing a considerable amount of value.

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Kik Interactive to Fight Against SEC For Classifying its KIN Cryptocurrency as Securities

On the other hand, the CEO noted that there is still a potential for users to make profits while using the virtual currency. Therefore, Livingston said KIN …
SEC Fines Two ICO Over Offering
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Kik Interactive, the social messaging platform behind the cryptocurrency, KIN is about to fight against the ordering of the Securities and Exchange Commission (SEC). The Canadian company claims that its digital asset which the financial regulators have classified as “securities” is a “utility token”, according to a media outlet’s report on January 27.

Kik to Fight Against SEC in Court

Per the report, the Ontario-based tech company is about to fight against the SEC in court for categorizing KIN as securities which have to be registered under the U.S. laws. According to Ted Livingston, Kik’s CEO, its digital asset is a utility token because users are not led to believe that they can be used to make investments.

On the other hand, the CEO noted that there is still a potential for users to make profits while using the virtual currency. Therefore, Livingston said KIN should not be subject to the same registration imposed on assets such as bonds, treasury stock, security future, etc. because KIN is a currency that can be exchanged for goods and services.

KIN Cryptocurrency Targeted at the KIK Social Messaging Service

KIN, the asset in question is targeted at Kik, a social messaging app for Android and iOs smartphones. The virtual currency is used in Kik to reward admins and moderators. In the same vein, users of the platform can earn the token through surveys and publishing premium content. They can get rewards from 30 other apps on Google Play and iOS App stores.

Reports also reveal that during the digital asset’s ICO, about $100 Million was raised which is quite a big deal for a token sale event that held in 2017. However, like many others in the industry which have been targeted by the SEC, Kik is about to fight back. This may likely impact on the future of other ICOs, and the crypto industry.

Basis Discontinues Launch Due to SEC’s Registration Demand

Basis stable coin project, for instance, an ICO which raised $133 million had to be discontinued in December 2018, and the developers attributed this to the SEC’s actions. Here, Basis was categorized as securities which have to be registered under the U.S. laws. The same is now the case of Kik who has decided neither to fold nor adhere to the SEC’s terms.

On November 9, BTCNN also reported that Zachary Coburn, Etherdelta’s CEO had been fined by the SEC for operating an unregistered exchange where several securities are traded. The CEO complied with the financial regulators by registering the exchange and agreeing to pay $300,000 in disgorgement, $75,000 penalty, and $13,000 in prejudgment interest.

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