SEC Sues Kik Over $100 Million ICO (bloomberg.com) 62
The Securities and Exchange Commission sued Kik for illegally raising $100 million through a 2017 digital-token sale, in one of its highest profile cases targeting a company for not registering an offering with the regulator. From a report: After losing money for years on its sole product, an online-messaging application, Kik raised more than $55 million from U.S. investors by selling a digital token called Kin without the proper disclosures, the SEC said in a Tuesday court filing. The agency is seeking unspecified monetary penalties. "Companies do not face a binary choice between innovation and compliance with the federal securities laws," said Steven Peikin, co-head of the SEC's enforcement division. Kik was among the biggest initial coin offerings in the past two years and has prominent backers. Venture capitalist Fred Wilson defended the Kin digital currency in a blog post, saying it is not a security.
Re: In other words (Score:2, Insightful)
What the SEC is realizing is that companies are operating under the erroneous notion that digital currencies arent securitiea and can do whatever they want with them. This is incorrect and the SEC is reminding them of that fact.
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What are you, a payday lender or something?
Governments are complex things, and many of the roles the SEC plays are critical. You can't actually want investment fraud, can you? Insider trading?
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Re: In other words (Score:2)
Does anybody still watch SNL? Wasn't that on broadcast TV?
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Does anybody still watch SNL? Wasn't that on broadcast TV?
GP clearly wrote "SLN".
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The game's up, of course - it's only a matter of time before capital raising is a truly global...
It's as if you were reading my mind...
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You can argue if the SEC is good or bad as an idea but to argue that an ICO or any similar offering is not a "security" in the same way a stock or bond is a security then you are an ignorant fool. What matters is that there is a transfer of money with a promise / evidence of ownership of something. The SEC's job is to protect people from making transfers to shady characters and so it has rights to punish those that don't follow the rules just the same as cop have the right to give speeding tickets.
The wor
Re:In other words (Score:5, Insightful)
The world can definitely exist without the SEC. But in that world grandmas, the uneducated, and children would be constantly preyed upon by innumerable investment scams and there would be no way to stop it. As a general society we have agreed that there should be rules around offering securities for sale and the SEC enforces those rules. It doesn't sound like you are debating that an ICO is a security, so I don't understand your point.
Hate to say it, but AC's got a point here. It's not as if the SEC is sending jackbooted goose-stepping thugs to Kik's doors and seeing the place on fire, and *some* basic regulation of securities sales is quite necessary, even in this day and age.
You can argue all you want to over how much regulation should exist (or not - believe it or not, the SEC does need to throttle back in some areas), but arguing that it should not exist at all is just begging for widespread fraud.
Re:In other words (Score:4, Insightful)
I take it you don't work in finance. Otherwise you'd realize that once the SEC gets underway, those pipe dreams will be over very quickly.
Most people working at the regulators truly want to safeguard the public. And this case is a good example of why they are a necessity.
As for the "this is no security" defense: well, he has a point. There was nothing secure about it. However, they did raise money and raising money is a strictly regulated activity. It doesn't matter how you dress it up.
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"Companies raising money from the public is strictly regulated"
That's the key point, not Machiavelli.
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Otherwise you'd realize that once the SEC gets underway, those pipe dreams will be over very quickly. The US government is powerful, but is made of human beings who bleed when cut. One day, like the British and Roman empires before it, it will fall. And the institutions we're building now may be the ones to outlast them. Maybe it'll be the next generation, though.
Most people working at the re
Re: In other words (Score:2)
I'd be interested to know what form of government you'd choose to replace it.
They're enforcing existing laws (Score:2)
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You don't get to change the name of something, put it on the internet and act like it's a new thing that never existed before.
Are you joking? That's literally 90% of the patents that have been filed in the last 20 years.
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Or the SEC is starting to say a scam is a scam no matter how nice your suit is.
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Re: In other words (Score:2)
That's true of all governments though. What do you suggest replaces it?
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digital currency is not a security (Score:2)
Venture capitalist Fred Wilson defended the Kin digital currency in a blog post, saying it is not a security.
That's exactly what I heard when asking how to pay my taxes - something changed since?
Re:digital currency is not a security (Score:5, Informative)
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Oh, that's a very good explanation actually.
"Hinman specifically said that bitcoin is not a security because it is decentralized: there is no central party whose efforts are a key determining factor in the enterprise. In addition, ether is also not a security because the ethereum network is also decentralized."
Kik may be a security if it is centralized and/or promised a return on investment during the ICO.
Regulators actually warned them ahead of time (Score:5, Informative)
> Perhaps Kik should have conferred with the SEC before their ICO on the matter.
The Canadian counterpart to the SEC actually did tell them ahead of time that the way they were planning to do it, it was a security. So they didn't offer it to Canadians. They did seek investment in the United States, and surprise surprise it's a security in the US too.
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I suggest you ICO in Africa. Or Russia.
That way, if the investors don't like the results, they recuperate their funds with AK-47's in hand, and we don't have to bother about it.
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This is just more proof that if you are doing anything with cryptocurrency you should never do it within the United States.
I'm not seeing how the US can lose from such a policy.
There is zero benefit to doing an ICO while being within the USA.
Zero benefit would be a vast improvement for people investing in ICOs.
Bit Late. (Score:2)
Shouldn't this should have been done in 2017? Why now?
Cryptocurrency is Property (Score:1)
"For federal tax purposes, virtual currency is treated as property."
This is on the IRS website in several places.
Point being: its not a security?
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The key is "For federal tax purposes" - it's just the view of the IRS. The SEC may have a different POV for regulatory purposes.
Basically, each government service that regulates finance in some way can have their own view on things, and at the end of the day may decide they *all* regulate you. Heaven help you if you managed to mess up that badly.
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It's considered an asset in order to tax it (why leave money on the table, eh?). Otherwise, I don't see the US government (or any other government) putting their reserves in bitcoin any time soon.