Cryptocurrency enthusiasts, pay attention: A potentially landmark case that could have ramifications across the industry has just begun.
On Tuesday, the U.S. Securities and Exchange Commission sued popular Canadian messaging app Kik for illegally raising $100 million through an initial coin offering in 2017. The lawsuit alleges that Kik "expected to run out of cash to fund its operations" and hastily launched the cryptocurrency sale without properly disclosing information about its new token (called "Kin") or its business to investors.
Kik, founded in 2009, is best known for its anonymity-encouraging features, popularity among teenagers, and numerous child exploitation controversies. The company achieved a $1 billion valuation following an investment from Chinese internet giant Tencent in 2015, and attracted its 300 millionth user the following year.
If successful, the SEC could force Kik to return the millions of dollars it raised.
"We have been expecting this for quite some time, and we welcome the opportunity to fight for the future of crypto in the United States," Kik founder and CEO Ted Livingston said in a press release. "We hope this case will make it clear that the securities laws should not be applied to a currency used by millions of people in dozens of apps."
In anticipation of this lawsuit, the company has been asking for public donations to its "defend crypto" fund since May. Kik pledged $5 million of its own money, according to The Wall Street Journal--but, thanks to a recent fall in cryptocurrency prices, the fund's total value currently sits at $4.8 million.