Kik Suffers Setbacks With 'Void for Vagueness' Defense in SEC Case
Kik has hit a brick wall with its ambitious "void for vagueness" defense in a case brought by the SEC over its $100 million initial coin offering.
Kik is struggling to mount a strong defense in a case brought by the U.S. Securities and Exchange Commission (SEC) over its $100 million initial coin offering.
As reported last month, Toronto-based Kik's legal team attempted to persuade the district court of the Southern District of New York that the SEC's case – alleging the 2017 token sale violated securities laws – was void based on the premise that the legal definition of an “investment contract” is unclear. Kik argued that this "vagueness" precluded the definition from applying to its "kin" token offering.
The firm also sought to depose SEC officials in a bid to show the securities watchdog wasn't in a position to give clear guidance on token sales at the time of Kik's ICO.
The SEC, not surprisingly, vigorously opposed the "void for vagueness" defense, stating at the time:
Soon after our previous report, the judge in the case, Alvin K. Hellerstein, sided with the SEC view and refused Kik's motion for discovery.
Not only that, but Hellerstein on Tuesday threw out a subsequent motion to reconsider from the former messaging app company, tearing up Kik's vagueness defense with the explanation:
Last month, Kik's messaging platform was acquired by MediaLab, a holding company with Whisper and other apps in its portfolio. Kik CEO Ted Livingstone has said the SEC action prompted the sale.
So what's next? In the latest filing, also made public Tuesday, the SEC asks Judge Hellerstein to allow it to depose seven individuals after the current fact discovery deadline of Nov. 29.
These individuals include blockchain author and investor William Mougayar, kin app developer Luc Hendriks and Ilan Leibovich, who was Kik's VP of product around the time of the ICO. Hellerstein has yet to respond to the SEC's request.
The date of the next hearing is yet to be determined.
You can read the SEC's letter below:
SEC Letter to Judge Hellerstein in Kik Case by CoinDesk on Scribd
Law image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.