Canadian messaging app Kik is closing so that the company can focus on its cryptocurrency Kin, which is front and centre of a US Securities and Exchange Commission (SEC) lawsuit.
The shutdown announcement also revealed that more than 80 employees will be let go as the company pivots to focus on Kin.
“These are hard decisions,” Ted Livingston, CEO of Kin, wrote in a Medium post announcing the closure. “Kik is one of the largest apps in the US. It has industry leading engagement and is growing again. Over 100 employees and their families will be impacted. People who have poured their hearts and souls into Kik and Kin for over a decade.”
Kik launched the cryptocurrency in 2017 with a high-profile initial coin offering (ICO). While it raised $100m, it is now the focus of the SEC’s lawsuit.
The financial watchdog sued Kik in 2019 and accused it of having skirted US securities regulations by not registering the ICO.
“By selling $100m in securities without registering the offers or sales, we allege that Kik deprived investors of information to which they were legally entitled, and prevented investors from making informed investment decisions,” said Steven Peikin, co-director of the SEC’s Division of Enforcement, at the time. “Companies do not face a binary choice between innovation and compliance with the federal securities laws.”
At the time Robert A. Cohen, chief of the Enforcement Division’s Cyber Unit, added, “Kik told investors they could expect profits from its effort to create a digital ecosystem. Future profits based on the efforts of others is a hallmark of a securities offering that must comply with the federal securities laws.”
Kik has countered by arguing that Kin is not a security.
“After 18 months of working with the SEC the only choice they gave us was to either label Kin a security or fight them in court,” Livingston wrote. “Becoming a security would kill the usability of any cryptocurrency and set a dangerous precedent for the industry. So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight.
“While we are ready to take on the SEC in court, we underestimated the tactics they would employ. How they would take our quotes out of context to manipulate the public to view us as bad actors. How they would pressure exchanges not to list Kin. And how they would draw out a long and expensive process to drain our resources.”
He concluded that while Kik would shut down, Kin would be here to stay.
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