Yesterday, the United States Securities and Exchange Commission sued Kik Interactive Inc, a Canadian company, for “…conducting an illegal $100 million securities offering of digital tokens.”
Here is the SEC Press Release.
The issuance of “tokens” has been a supercharged issue in the cryptocurrency world for some time as the issuers contend these tokens are not securities — therefore not subject to the requirements to issue a US SEC Form S-1, Registration and to provide quarterly, annual reports as well as reports of material events — while the SEC says maybe they are.
In any event, the issue has been out there for some time.
Many crypto advocates have suggested it will take a legal confrontation, like this one, for the issue to be resolved. Well, fellas, you got your wish.
The SEC is focused on the implications of what happens or doesn’t happen when a “security” is registered and issued.
Specifically, they contend, “By selling $100 million in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions.”
Keep that “information” nugget in the front of your brain as you read deeper into this post.
The SEC’s view is that it is the securities issuing regulations and compliance therewith that provides the appropriate protections for investors. The requirements as noted above are:
1. The issuance of a US SEC Form S-1, Registration Statement — filed with the SEC for comment and revision prior to issuance and thereby providing a platform upon which to make disclosures about the financial health of the issuer, discuss risks and other information a buyer would find of vital interest.
2. The filing of quarterly reports, annual reports, and reports of “material” events and actions.
This would, in essence, create a public security. It is not end of the world. You cannot even see it from there.