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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

#271

Post by lkrubner »

CryptoPunk wrote: post #244
colechristensen wrote: post #197

Earlier quoted context omitted.

The regulations indeed exist because fraud in this vein was prevalent and it made it difficult to compete if you weren't defrauding investors.

Do you have any evidence for that? There are other ways of addressing fraud besides violating people's right to freely contract with other consenting adults, like punishing those who commit fraud to deter others from committing the crime, and public education campaigns. The idea that the government has a right to deem a certain class of investors as "unsophisticated", and thus better off deprived of the right to deci…

About this:

“The poorest households in the US spend 9% of their income on lottery tickets, showing that you can't legislate people out of misusing their funds.”

You’ve explained why it’s urgent that we outlaw lottery tickets. For most of USA history Protestant and Catholic leaders were unified in their opposition to all forms of gambling, and so lottery tickets were unthinkable for most of USA history. And every progressive activist that I know personally would like to see an end to lottery tickets and other forms of de facto regressive taxation. Lottery tickets, like other forms of gambling, tend to undermine habits of thrift and sobriety.

I agree with your implied analogy — ICOs are like lottery tickets. That’s why they should be banned.

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

#272

Post by colechristensen »

arcticbull wrote: post #262
CryptoPunk wrote: post #244

Earlier quoted context omitted.

Do you have any evidence for that? There are other ways of addressing fraud besides violating people's right to freely contract with other consenting adults, like punishing those who commit fraud to deter others from committing the crime, and public education campaigns. The idea that the government has a right to deem a certain class of investors as "unsophisticated", and thus better off deprived of the right to deci…

You’ve got this backwards. Anyone can sell securities to any investor if the company they’re selling shares in can commit to providing regular audited financial disclosures showing they’re not frauds. It’s on the product being brought to market to show it’s fit for sale, not for the investor to show they’re “sophisticated.” If they show they’re sophisticated they can elect to waive the reporting requirements. You cou…

>Anyone can sell securities to any investor

can being the operative word. There is a very significant market for investments where "sophisticated" – er – Accredited Investors get access to purchase securities that are not available to the public.

Frustration from people who want to but cannot access this market is real and arguably valid, a balancing act between preventing fraud and granting access which is tipped a bit too far towards not necessarily preventing fraud but restricting access for the benefit of a few. (on the other hand before you go public there is a benefit to only having investors that really know what they are doing, the rabble of small time less knowledgable investors can be a business risk before your company is ready for the public)

What I am saying is that the people spouting nonsense come from a place where there is truth, but so many people know so little about it that good discussions are hard to come by.

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

#274

Post by colechristensen »

lkrubner wrote: post #271
CryptoPunk wrote: post #244

Earlier quoted context omitted.

Do you have any evidence for that? There are other ways of addressing fraud besides violating people's right to freely contract with other consenting adults, like punishing those who commit fraud to deter others from committing the crime, and public education campaigns. The idea that the government has a right to deem a certain class of investors as "unsophisticated", and thus better off deprived of the right to deci…

About this: “The poorest households in the US spend 9% of their income on lottery tickets, showing that you can't legislate people out of misusing their funds.” You’ve explained why it’s urgent that we outlaw lottery tickets. For most of USA history Protestant and Catholic leaders were unified in their opposition to all forms of gambling, and so lottery tickets were unthinkable for most of USA history. And every prog…

>ICOs are like lottery tickets

Not all of them, though maybe nearly all of them.

There is nothing at all wrong with using a crypto-system to distribute ownership of your business. The SEC is actively working to make this a reality. It is just a different market to do the same thing.

There is however so very much wrong with doing this outside regulation. Black market shares of your company are bad. Making up the nth new coin and selling its nonsense to the unwise in pump and dump schemes is wrong. In order to do so legally you have to be extraordinarily careful to completely divorce yourself from the US financial system and doing business on US soil.

Banks themselves are starting to use crypto-coins to operate. They're just a tool, when used in the right way they aren't an exciting anarchist revolution usurping The Man, they're just a different sort of database/API. JPMorgan is setting something up for business-to-business transactions because they think it could be a better replacement for the current complex frameworks they have for keeping track of money.

Most ICOs are like bad lottery tickets, but it's not the technology underlying it at fault.

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

#275

Post by kenneth »

elliekelly wrote: post #117
mindcandy wrote: post #103

Earlier quoted context omitted.

Hey... I'm not citing. I'm not even arguing. I'm quoting their answer to your question. Supposedly Kik did seek clarification from the SEC and didn't get any. Then they received an enforcement action which is supposed to include details about the problems involved and the actions to be taken, but it contained none of those. Since then, they have been working for a year to get any kind of detail from the SEC, and the…

I don't buy this argument from Kik for a second. The SEC might not always get back to you immediately but they sure as shit aren't going to lob charges your way when you're in the middle of working with them. In my experience they're very reasonable and willing to hear you out _so_long_as_ you're respectful, patient, and open to reaching a compromise.

In my experience, the SEC is one of the most reasonable and competent government agency.

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

#276

Post by JumpCrisscross »

jjeaff wrote: post #236
pfisch wrote: post #227

Earlier quoted context omitted.

I mean it is generally your fault when you get scammed and your money is gone. Unless they scammed a third party who gave your money away. That is an entirely different can of worms. It is also the scammers fault for scamming, and they face their own set of consequences. I also think there is this bizarre double talk on HN where people say sophisticated investor status shouldn't be a thing while also condemning ICOs,…

On a side note, I wish the term, "sophisticated investor" wasn't the official one. It's a misnomer because it implies there is some kind of knowledge or skill threshold required. What it really means is "has enough money they can afford to lose some". In reality, there are plenty of people who have tons of money and not a clue how to invest it well.

> I wish the term, "sophisticated investor" wasn't the official one

It's not. "Accredited investor" is the official term. "Sophisticated investor" is a higher finance-colloquial bar, typically requiring one follow institutional best practices (e.g. legal and risk reviews).

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

#277

Post by arcticbull »

colechristensen wrote: post #272
arcticbull wrote: post #262

Earlier quoted context omitted.

You’ve got this backwards. Anyone can sell securities to any investor if the company they’re selling shares in can commit to providing regular audited financial disclosures showing they’re not frauds. It’s on the product being brought to market to show it’s fit for sale, not for the investor to show they’re “sophisticated.” If they show they’re sophisticated they can elect to waive the reporting requirements. You cou…

>Anyone can sell securities to any investor can being the operative word. There is a very significant market for investments where "sophisticated" – er – Accredited Investors get access to purchase securities that are not available to the public. Frustration from people who want to but cannot access this market is real and arguably valid, a balancing act between preventing fraud and granting access which is tipped a…

I do agree with you, though access to private market equity isn’t a sure win by any means. A startup fails to raise their next round of funding 90% of the time every time. The riches are survivorship bias largely. This also doesn’t solve for deal flow which you have to figure out yourself anyways, and to get the equity “clearly” headed for the top you better be able to demonstrate value. You can already access “private market” equity via crowdfunding terms in the JOBS act but those exchanges exhibit heckin adverse selection issues.

The reality is if you’re a high profile founder with a great idea and traction you can get money from mostly everyone while maintaining a nice clean cap table. If you aren’t, you then raise from “suckers” (see the ICO market).

It's as though some of the libertarian leaning commenters think these rules were brought in because the government was tired of seeing so many poor people become wealthy. The reality is the government was tired of seeing so many poor people get rekked and thrown into the welfare system, what little of it there is here.

tl;dr: getting rich isn’t easy and deregulation is likely to cause more harm than good.

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

#278

Post by boh »

modeless wrote: post #169

This was inevitable. As I said two years ago[1], just listen to Kik's own words: "When we looked at raising another round [of VC funding], we asked ourselves how do we answer the question about how we will become a profitable business [...] We didn’t have an answer we really believed." ... so instead they decided to raise money from unsophisticated investors in an unregulated market, where nobody asks such inconvenie…

What's unbelievable is the lack of sophistication on Kik's part. Any lawyer working for them should've responded immediately to this statement (and their general nonchalance about the issue) and advised to shut the ICO down immediately.

You literally can't make this any easier for the SEC. There's not much of a defense when you repeatedly admit that you're attempting to raise money by issuing something you market as an investment opportunity.

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

#279

Post by JackFr »

jjeaff wrote: post #238
tasssko wrote: post #231

Earlier quoted context omitted.

Using other peoples money to pay for lawyers to defend against taking peoples money illegally. Yes I fully expected this to happen.

No idea how often they go after it, but if you pay your attorney with ill-gotten gains, those funds can be confiscated from the attorneys for restitution to the victims.

https://www.justice.gov/jm/jm-9-120000-attorney-fee-forfeitu...

9-120.000 - ATTORNEY FEE FORFEITURE GUIDELINES

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

#280

Post by asdfasgasdgasdg »

flyGuyOnTheSly wrote: post #136
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.

Not according to the page linked to on the SEC website: >The SEC seeks a permanent injunction, disgorgement plus interest, and a penalty. So they're seeking $55,000,000 USD of US investor funds, plus interest, plus a penalty. That would bankrupt Kik and decimate the future of the project.

https://coinmarketcap.com/currencies/kin/

People with skin in the game clearly think it's a big deal. Kin's price tanked by 25% today, and that's after a long decline since the Well's notice. That trading volume is telling too. They turned over about 10% of the outstanding shares. By comparison, a typical day for GOOGL is 0.5%.

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