Canadian social-media company Kik Interactive Inc. has become the most prominent business sued by U.S. regulators over claims it illegally raised capital by selling its own cryptocurrency, the Wall Street Journal reported. The Securities and Exchange Commission sued Kik on Tuesday in federal court, alleging that the company’s 2017 “initial coin offering” evaded U.S. investor-protection laws. With the civil lawsuit, the SEC is confronting one of the biggest ICOs two years after Kik raised $100 million selling a cryptocurrency it called kin. The SEC said Kik was running out of money in 2017 and decided on a “Hail Mary” effort to raise capital through an ICO, even though U.S. regulators had warned that ICOs probably needed to comply with the U.S. regulatory process. That typically requires preparing a detailed legal prospectus that discloses the company’s performance and prospects and making audited financial statements public. Before selling its token, Kik sought feedback from a Canadian regulator, the Ontario Securities Commission, which said it probably needed to comply with securities laws, the SEC’s lawsuit alleged. Kik excluded Canadian residents from its token sale and marketed the deal in the U.S., the SEC lawsuit said.
