SEC Charges Kik With Conducting $100M Unregistered ICO • Hacker News Board

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#141

Post by btown » Tue, Jun 04, 2019, 7:41 PM UTC

flyGuyOnTheSly wrote: post #131

>The complaint further alleges that Kik marketed the Kin tokens as an investment opportunity. Kik allegedly told investors that rising demand would drive up the value of Kin To be fair... Yes Kik did sell them as investments... claiming rising demand would drive up the price of Kin... which did indeed happen. The kin tokens increased in value over 10x from the price they were sold to investors at. It didn't last, of…

From the complaint https://www.sec.gov/litigation/complaints/2019/comp-pr2019-8... :

> Kik has agreed to jurisdiction in the United States concerning disputes relating to Kin. When selling Kin to the general public, Kik required investors to agree that all disputes about the purchase and use of Kin would be heard by an arbitrator or court in the United States, specifically in the State of Delaware.

So they should have known. And maybe they did, thinking that if they tried to register with the SEC their fundraise would not be allowed and the company would almost certainly declare bankruptcy; but that if they did not register, even after the DAO report, they'd at least have a chance of sneaking through, and if they were caught, they might avoid personal liability. Many people disobey the law out of desperation, and if nobody goes to jail, then disobedience becomes even more likely for those in such a situation.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#142

Post by JudgeWapner » Tue, Jun 04, 2019, 7:44 PM UTC

dmix wrote: post #86

nostrademons wrote: post #76

Earlier quoted context omitted.

They want to add payments to their messenger app. That's a known business model and a hot area right now - WeChat pioneered it, Line does it too, and Facebook is working on a cryptocurrency-based solution that does the same thing.

The rewards could be huge if payments via messaging apps takes off in the west. It's really too bad WhatsApp sold to Facebook of all places. We could have a privacy-oriented chat platform with a cryptocurrency "small cash" type of transaction system built on top. Combined with some informal craigslist style mini-stores, which flourished in China via Wechat. I'm sure FB/WhatsApp could do it via normal payment channels…

Theoretically this could be possible now with existing cryotos by making small wallets for micro transactions. The chat app would just need to link your blockchain address to make it easily copy and paste-able

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#143

Post by pbhjpbhj » Tue, Jun 04, 2019, 7:44 PM UTC

miohtama wrote: post #58

behringer wrote: post #49

Earlier quoted context omitted.

Name one

Ethereum. Also: Stellar. Or anything where money is raised for a non-profit organization. Preferably as donations. More transparent this organization the better. Non-profit nature is very good in guarding against my expectation of profit by the work of an issuer.

Not sure how non-profits work in USA but in UK whilst charities can't give profits they can give massive wages/bonuses to people through payroll. You can start a charity, take donations, pay yourself a huge bonus and then declare the charity insolvent -- "no profit made, all available funds used for charitable purposes".

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#144

Post by solotronics » Tue, Jun 04, 2019, 7:44 PM UTC

shyneeup wrote: post #132

dmix wrote: post #86

Earlier quoted context omitted.

The rewards could be huge if payments via messaging apps takes off in the west. It's really too bad WhatsApp sold to Facebook of all places. We could have a privacy-oriented chat platform with a cryptocurrency "small cash" type of transaction system built on top. Combined with some informal craigslist style mini-stores, which flourished in China via Wechat. I'm sure FB/WhatsApp could do it via normal payment channels…

Don't know enough about crypto, but whats the benefit of a payment system for messenger apps to run on crypto at all? If you're transacting through a centralized messaging platform doesnt that defeat the purpose of a decentralized currency or ledger?

It would open up ways to get money into and out of your chat app with less friction.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#145

Post by flyGuyOnTheSly » Tue, Jun 04, 2019, 7:47 PM UTC

btown wrote: post #141

flyGuyOnTheSly wrote: post #131

>The complaint further alleges that Kik marketed the Kin tokens as an investment opportunity. Kik allegedly told investors that rising demand would drive up the value of Kin To be fair... Yes Kik did sell them as investments... claiming rising demand would drive up the price of Kin... which did indeed happen. The kin tokens increased in value over 10x from the price they were sold to investors at. It didn't last, of…

From the complaint https://www.sec.gov/litigation/complaints/2019/comp-pr2019-8... : > Kik has agreed to jurisdiction in the United States concerning disputes relating to Kin. When selling Kin to the general public, Kik required investors to agree that all disputes about the purchase and use of Kin would be heard by an arbitrator or court in the United States, specifically in the State of Delaware. So they should hav…

>their fundraise would not be allowed and the company would almost certainly declare bankruptcy

That was my best idea as well as to what they were thinking at the time.

Take money now and worry about the consequences later, or go bankrupt now and worry about that now.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#146

Post by berberous » Tue, Jun 04, 2019, 7:47 PM UTC

duxup wrote: post #110

will_brown wrote: post #95

Earlier quoted context omitted.

>Patrick Gibbs: First your citing the Cooley attorney who advised the company...of course he is going to justify his own legal advice. It’s not going to look good when the court determines Kik knew if could have sought clarification from the SEC but didnt Because the SEC no Action Letter process wasn’t practical. Let’s also keep in mind Cooley is the Firm that developed the SAFT (security agreement for future tokens)…

>Let’s also keep in mind Cooley is the Firm that developed the SAFT (security agreement for future tokens) released their SAFT whitepaper into the wild telling startups to use their SAFT legal framework to raise money with ICOs legally and these are some of the first companies the SEC targeted for enforcement actions. They threw out some free legal advice and people used it? I guess you get what you pay for. I rememb…

>I remember the story of the startup executive...

For anyone curious, I think the parent poster is thinking of Ben Horowitz: https://a16z.com/2014/02/06/why-i-did-not-go-to-jail/

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#147

Post by joshstrange » Tue, Jun 04, 2019, 7:49 PM UTC

mrguyorama wrote: post #36

joshstrange wrote: post #22

Are there legitimate uses for Kik past NSFW uses? I only ask because that is the only context in which I've ever seen Kik used. I didn't know if it was popular in other places (not the USA) for SFW purposes.

It is/was super useful for tinder bots to make redundant contact before being banned from the tinder app.

Tinder-communications-pivoting was definitely one of the big use-cases I've seen (Along with other adult social networks like bumble, grindr, scruff) for Kik. That and on NSFW subreddits it appears to be one of the top ways for people to establish communication outside of reddit.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#148

Post by joshstrange » Tue, Jun 04, 2019, 7:49 PM UTC

JudgeWapner wrote: post #43

joshstrange wrote: post #22

Are there legitimate uses for Kik past NSFW uses? I only ask because that is the only context in which I've ever seen Kik used. I didn't know if it was popular in other places (not the USA) for SFW purposes.

I use it as a general e-friends chat service. It doesn't require giving your address book or phone number like WhatsApp (and presumably doesn't track you like all Facebook products do). It gives you anonymity, unlike regular texting. It doesn't have terrible Microsoft-UX like Skype. It does one thing and does it well.

Thank you for your response! I've honestly never even installed it, maybe I should check it out.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#149

Post by berberous » Tue, Jun 04, 2019, 7:54 PM UTC

DennisP wrote: post #42

toomuchtodo wrote: post #5

Earlier quoted context omitted.

You're giving away a security that is still considered a security. That doesn't mean it won't be regulated as a security.

First clause of the Howey Test is that there's an investment of money. Perhaps at some point the SEC lawyers will argue to a court that something can still be a security without an investment of money, but I don't think there's any particular reason to think a court will agree.

The Securities Act prevents the offer or sale of a security for "value" -- and there is precedent that giving away free securities can still be an offer of securities for "value". See this 1999 SEC press release: https://www.sec.gov/news/headlines/webstock.htm

Whether something passes the Howey test and is deemed a security is a different matter, but you can "airdrop" a clear security (which certain cryptocurrencies certainly are), and violate Section 5 of the Securities Act notwithstanding the fact that the value to the issuer was not cash.

Re: SEC Charges Kik With Conducting $100M Unregistered ICO

#150

Post by nostrademons » Tue, Jun 04, 2019, 7:55 PM UTC

solotronics wrote: post #144

shyneeup wrote: post #132

Earlier quoted context omitted.

Don't know enough about crypto, but whats the benefit of a payment system for messenger apps to run on crypto at all? If you're transacting through a centralized messaging platform doesnt that defeat the purpose of a decentralized currency or ledger?

It would open up ways to get money into and out of your chat app with less friction.

Also saves you from the "How do I know you won't run off with the money?" and "What happens if Kik goes out of business?" questions. The value of a blockchain is that your digital tokens exist independently of the sponsoring organization, so the sponsoring organization cannot just alter or shutdown their database to make your funds go poof.

Granted, if Kik went bust tomorrow those tokens would most likely have no value, since their use is tied to Kik's messenger app. But in theory you would still own the tokens and could transfer them to anyone who would accept them.