The SEC has filed a lawsuit accusing the social media startup of conducting an illegal securities offering, in the latest step in the regulatory body's effort to monitor the issuance of digital currencies. The Canadian company had originally launched the initial coin offering (which raised $100 million) about two years ago.
The lawsuit alleges the ICO was a last-ditch attempt by Kik to avoid insolvency. It says that Kik expected to run out of cash by the end of 2017 and that one board member described the plans for an ICO as a "hail Mary pass" to save the company. By not offering a complete picture of Kik's financial situation, the suit says the company failed to inform prospective investors about "the most significant factors that made the offering speculative and risky." The filing of the lawsuit came about a week after Ted Livingston, the CEO of Kik, launched a new effort called "Defend Crypto". This initiative is seeking contributions from other cryptocurrency enthusiasts to help finance Kin's showdown with the SEC.