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Note that Kik has expressly stated that they have really wanted this case to go to court for some time now. They strongly believe that the SEC guidance so far

Note that Kik has expressly stated that they have really wanted this case to go to court for some time now. They strongly believe that the SEC guidance so far has been vague and non-committal to the point of becoming damaging. They believe they have a case that Kin is not a security and that the Howey Test is being mis-applied to many cryptos. By going through with the suit they hope to fast-forward more concrete guidance from the SEC. https://unchainedpodcast.com/kin-sets-up-5-million-defendcrypto-org-to-take-on-the-sec/ https://unchainedpodcast.com/kin-sets-up-5-million-defendcry...

r00fus 7y ago
Is their intention to set a precedent with a sympathetic court? I know a lot of other actions around the country are pushing the limits, hoping to get a favorable ruling and establish precedent (see: case vs. ACA being unconstitutional).
- bredren 7y ago
  Now is the time to do it.
- mikeleung 7y ago
  They are looking to be the test case to set a precedent in order to force clarity around securities laws that are outdated and unclear when being applied to cryptocurrencies
  - Alex3917 7y ago
    The law has been the same since the 1920s. Adding crypto to the mix has zero affect on whether or not something is a security offering.
  - Advaith 7y ago
    Interesting. The risk vs. reward seems apt in my opinion. If Kik ends up winning, it brings out clarity that a lot of people stand to benefit from.
  - mountainofdeath 7y ago
    If it looks like a security, and smells like a security and behaves like a security...it is a security regardless of the the mechanism.
    - aey 7y ago
      Is writing software protected by freedom of speech? Is encoding a set of account values into a genesis block posted on GitHub a security offering?
  - JeremyBanks 7y ago
    They are looking for a test case because, per the SEC document, they were bankrupt and have literally no alternative but to fight it, as any settled penalty will sink their business. They're so fucked. Good riddance.
duxup 7y ago
Doesn't everyone publicly look forward to proving their case in court when the inevitable legal battle is obvious? Not many folks say "Oh man I don't want the SEC to sue me, I'm gonna get creamed in court!"
- nostrademons 7y ago
  A lot of people think it, but if you're thinking it the last thing you want to do is publicize that and invite people (particularly the SEC) to ask "Why don't you want the SEC to sue you?" A number of smaller ICOs just settled with the SEC and refunded the money to investors when they got a Wells Notice. Those are all the folks who said "Oh man I don't want the SEC to sue me, I'm gonna get creamed in court." Kik is different in that they have deep pockets, strong legal counsel, and a product that's been out there for 8 years.
  - duxup 7y ago
    Well a messenger app for 8 years, but that's not really what the lawsuit is about.
    - nostrademons 7y ago
      They want to add payments to their messenger app. That's a known business model and a hot area right now - WeChat pioneered it, Line does it too, and Facebook is working on a cryptocurrency-based solution that does the same thing.
      - dmix 7y ago
        The rewards could be huge if payments via messaging apps takes off in the west. It's really too bad WhatsApp sold to Facebook of all places. We could have a privacy-oriented chat platform with a cryptocurrency "small cash" type of transaction system built on top. Combined with some informal craigslist style mini-stores, which flourished in China via Wechat. I'm sure FB/WhatsApp could do it via normal payment channels, probably involving Visa/Mastercard. But the privacy story is awful for such a critical piece of software. Assuming they could pull it off. Maybe Kik could take up the privacy flag? WSJ made a nice video of how Chinese people live "cashless" via WeChat in Shenzen: https://www.youtube.com/watch?v=75AXINUL47g https://www.youtube.com/watch?v=75AXINUL47g
burtonator 7y ago
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.
- flyGuyOnTheSly 7y ago
  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.
  - asdfasgasdgasdg 7y ago
    https://coinmarketcap.com/currencies/kin/ 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%.
- shawnz 7y ago
  Why should penalties necessarily bankrupt the company? Shouldn't the penalty be proportional to the damage they created by doing things improperly?
  - PierceJoy 7y ago
    There needs to be a punitive aspect as well. Simply taking away their profit doesn't discourage this in the future, as being caught isn't certain. I'm not saying the company should be bankrupted, but it has to hurt them enough that they wouldn't want to risk trying again.
    - httpsterio 7y ago
      Hurt them enough so that nobody will try the same again, not just kik. But then again, bankrupting them isn't the wisest choice, if they pay enough taxes and their offences isn't too severe, it would be better to have them around employing people and paying taxes and wages vs it doesn't exist at all.
tasssko 7y ago
Using other peoples money to pay for lawyers to defend against taking peoples money illegally. Yes I fully expected this to happen.
- jjeaff 7y ago
  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.
  - JackFr 7y ago
    https://www.justice.gov/jm/jm-9-120000-attorney-fee-forfeiture-guidelines https://www.justice.gov/jm/jm-9-120000-attorney-fee-forfeitu... 9-120.000 - ATTORNEY FEE FORFEITURE GUIDELINES
  - saalweachter 7y ago
    I imagine if you look into the case law long enough, you'll find a case where someone tried to shield their assets by "paying" it all to their lawyer, with the understanding the lawyer would later find a way to give a reasonable fraction of it back.

r00fus 7y ago

Is their intention to set a precedent with a sympathetic court? I know a lot of other actions around the country are pushing the limits, hoping to get a favorable ruling and establish precedent (see: case vs. ACA being unconstitutional).

bredren 7y ago
Now is the time to do it.
mikeleung 7y ago
They are looking to be the test case to set a precedent in order to force clarity around securities laws that are outdated and unclear when being applied to cryptocurrencies
- Alex3917 7y ago
  The law has been the same since the 1920s. Adding crypto to the mix has zero affect on whether or not something is a security offering.
- Advaith 7y ago
  Interesting. The risk vs. reward seems apt in my opinion. If Kik ends up winning, it brings out clarity that a lot of people stand to benefit from.
- mountainofdeath 7y ago
  If it looks like a security, and smells like a security and behaves like a security...it is a security regardless of the the mechanism.
  - aey 7y ago
    Is writing software protected by freedom of speech? Is encoding a set of account values into a genesis block posted on GitHub a security offering?
- JeremyBanks 7y ago
  They are looking for a test case because, per the SEC document, they were bankrupt and have literally no alternative but to fight it, as any settled penalty will sink their business. They're so fucked. Good riddance.

duxup 7y ago

Doesn't everyone publicly look forward to proving their case in court when the inevitable legal battle is obvious? Not many folks say "Oh man I don't want the SEC to sue me, I'm gonna get creamed in court!"

nostrademons 7y ago
A lot of people think it, but if you're thinking it the last thing you want to do is publicize that and invite people (particularly the SEC) to ask "Why don't you want the SEC to sue you?" A number of smaller ICOs just settled with the SEC and refunded the money to investors when they got a Wells Notice. Those are all the folks who said "Oh man I don't want the SEC to sue me, I'm gonna get creamed in court." Kik is different in that they have deep pockets, strong legal counsel, and a product that's been out there for 8 years.
- duxup 7y ago
  Well a messenger app for 8 years, but that's not really what the lawsuit is about.
  - nostrademons 7y ago
    They want to add payments to their messenger app. That's a known business model and a hot area right now - WeChat pioneered it, Line does it too, and Facebook is working on a cryptocurrency-based solution that does the same thing.
    - dmix 7y ago
      The rewards could be huge if payments via messaging apps takes off in the west. It's really too bad WhatsApp sold to Facebook of all places. We could have a privacy-oriented chat platform with a cryptocurrency "small cash" type of transaction system built on top. Combined with some informal craigslist style mini-stores, which flourished in China via Wechat. I'm sure FB/WhatsApp could do it via normal payment channels, probably involving Visa/Mastercard. But the privacy story is awful for such a critical piece of software. Assuming they could pull it off. Maybe Kik could take up the privacy flag? WSJ made a nice video of how Chinese people live "cashless" via WeChat in Shenzen: https://www.youtube.com/watch?v=75AXINUL47g https://www.youtube.com/watch?v=75AXINUL47g

burtonator 7y ago

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.

flyGuyOnTheSly 7y ago
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.
- asdfasgasdgasdg 7y ago
  https://coinmarketcap.com/currencies/kin/ 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%.
shawnz 7y ago
Why should penalties necessarily bankrupt the company? Shouldn't the penalty be proportional to the damage they created by doing things improperly?
- PierceJoy 7y ago
  There needs to be a punitive aspect as well. Simply taking away their profit doesn't discourage this in the future, as being caught isn't certain. I'm not saying the company should be bankrupted, but it has to hurt them enough that they wouldn't want to risk trying again.
  - httpsterio 7y ago
    Hurt them enough so that nobody will try the same again, not just kik. But then again, bankrupting them isn't the wisest choice, if they pay enough taxes and their offences isn't too severe, it would be better to have them around employing people and paying taxes and wages vs it doesn't exist at all.

tasssko 7y ago

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

jjeaff 7y ago
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.
- JackFr 7y ago
  https://www.justice.gov/jm/jm-9-120000-attorney-fee-forfeiture-guidelines https://www.justice.gov/jm/jm-9-120000-attorney-fee-forfeitu... 9-120.000 - ATTORNEY FEE FORFEITURE GUIDELINES
- saalweachter 7y ago
  I imagine if you look into the case law long enough, you'll find a case where someone tried to shield their assets by "paying" it all to their lawyer, with the understanding the lawyer would later find a way to give a reasonable fraction of it back.