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SEC Charges Kik With Conducting $100M Unregistered ICO

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

#181

Post by DennisP »

elliekelly wrote: post #107
DennisP wrote: post #42

Earlier quoted context omitted.

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.

You're conflating the definition of a "security" under the Securities Act with the definition of an "investment contract" (undefined in the Securities Act and defined by the court in Howey ). An "investment contract" is just one of many things that fall within the definition of "security": > The term “security” means any note, stock, treasury stock, security future, security-based swap, bond, debenture, evidence of i…

Can you give an example of something that fails the Howey test, but is required to follow the SEC regulations that govern ICOs?

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

#182

Post by loceng »

sonnyblarney wrote: post #165

It's ridiculous that the SEC can't tell you what is and what is not going to work up front. My god, why should companies have to risk so much in this. Either they provide perfectly clear guidelines or they can screw off. Anything vague is extremely bad for business as it causes undue risk, confusion, lawyers galore. Also - timeframes matter. This event took place quite some time ago, it's totally unfair that the proc…

Crypto-"currencies" are relatively new - and many including myself see them as innovative Pyramid-Ponzi schemes. There's also clearly a lot of VC money involved now, and other less savvy people's money in them - the army of HODLers, so the SEC has to tread carefully.

Would you prefer - would those companies prefer - being completely ban/blocked from operating until SEC understood it all? I'm guessing no. I'm guessing too that investors would have liked the protection though, as would society in general - those who got drawn in by the shallow hype and lost money.

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

#183

Post by thesausageking »

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…

> I still don't understand why they didn't get SEC approval before offering the token sale, however.

Because what they did was illegal and the SEC would never have approved it. To do it legally, they would've had to only sell to accredited investors and there's no way they raise $100m doing that.

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

#184

Post by Advaith »

mikeleung wrote: post #97
r00fus wrote: post #25

Earlier quoted context omitted.

Is their intention to set a precedent with a sympathetic court? I know a lot of other actions around the country are pushing the limits, hoping to get a favorable ruling and establish precedent (see: case vs. ACA being unconstitutional).

They are looking to be the test case to set a precedent in order to force clarity around securities laws that are outdated and unclear when being applied to cryptocurrencies

Interesting. The risk vs. reward seems apt in my opinion. If Kik ends up winning, it brings out clarity that a lot of people stand to benefit from.

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

#185

Post by mountainofdeath »

mikeleung wrote: post #97
r00fus wrote: post #25

Earlier quoted context omitted.

Is their intention to set a precedent with a sympathetic court? I know a lot of other actions around the country are pushing the limits, hoping to get a favorable ruling and establish precedent (see: case vs. ACA being unconstitutional).

They are looking to be the test case to set a precedent in order to force clarity around securities laws that are outdated and unclear when being applied to cryptocurrencies

If it looks like a security, and smells like a security and behaves like a security...it is a security regardless of the the mechanism.

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

#186

Post by PierceJoy »

shawnz wrote: post #167
burtonator wrote: post #125

Earlier quoted context omitted.

This was my issue at the time too.. It was a horribly vague situation. The SEC usually acts but the penalties are usually for 1/100th of the profits. If Kik loses here they're just going to make them pay $1M 'penalty' and move on.

Why should penalties necessarily bankrupt the company? Shouldn't the penalty be proportional to the damage they created by doing things improperly?

There needs to be a punitive aspect as well. Simply taking away their profit doesn't discourage this in the future, as being caught isn't certain.

I'm not saying the company should be bankrupted, but it has to hurt them enough that they wouldn't want to risk trying again.

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

#187

Post by TeMPOraL »

Animats wrote: post #162
meowface wrote: post #89

Earlier quoted context omitted.

Honestly, that sounds a lot less scammy than nearly every other ICO out there. Kik is an established company with a social network product used by millions. Given their market position, I think their idea isn't totally farfetched. I could be missing some aspects that indicate it is a total scam, but just from that paragraph alone (which is all I know about the topic), I could see warranted interest from investors. Lo…

But not an established profitable company. This is a money-losing startup looking for another funding round.

Vast majority of people don't understand how Internet startups are run. Even here on HN, people need frequent reminders.

Myself, for a long time I believed tech startups are micro-R&D for new technologies. Couple years of HN and in the local startup community later, I finally realized that a lot of Internet startups tend to turn investor money into business model R&D - i.e. ever more innovative ways to break an existing market and siphon off enough wealth to get flipped and net the founders FU money. Regular people don't know any of that; they don't understand how the game is played, or why - they only enjoy free web services and cheap pirate taxi rides.

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

#188

Post by Lucadg »

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…

there is no way Whatsapp would be allowed to use a privacy oriented crypto. All payment are under surveillance, except cash.

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

#189

Post by elliekelly »

dragonwriter wrote: post #158
elliekelly wrote: post #112

Earlier quoted context omitted.

Sort of. It's called a Wells Notice[1] and it essentially means that (barring some really excellent lawyering) charges are imminent. [1] https://en.wikipedia.org/wiki/Wells_notice

A Wells notice is certainly a thing to distinguish from a suit, but does anyone ever refer to a Wells notice as a "suing" (perhaps "unofficially suing"), such that "officially suing" would need to be specified to make the distinction? (Yes, I realized that the HN title has changed to be closer to the source title, so this discussion is now about a title that doesn't exist anymore...)

Agreed, I've never heard anyone refer to a Wells notice as being "sued" (officially or unofficially!) but since there have been a few thread on HN about Kin/Kik's response to the Wells notice it was the only explanation for the wording I could think of.

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

#190

Post by nefitty »

flyGuyOnTheSly wrote: post #140
at-fates-hands wrote: post #135

Earlier quoted context omitted.

> The only money they have is from an unregistered sale of securities which was only undertaken because they HAD NO MONEY. Don't you think this would come out at trial? Sounds like the only reason they came out with an unregistered ICO was in order to generate revenue it needed to continue operating. That's a huge red flag for me if I'm an SEC investigator

It already came out upon initial investigation and most likely subpoenas: >the company’s management predicted internally that it would run out of money in 2017. In early 2017, the company sought to pivot to a new type of business, which it financed through the sale of one trillion digital tokens. Kik sold its “Kin” tokens to the public, and at a discounted price to wealthy purchasers, raising more than $55 million fr…

Wow, when you see it laid out like that, crypto looks terrifying. Note, I mean as an investment independent of technological prospects.
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