Canadian crypto firm lays off staff over legal challenge
A cryptocurrency firm based in Canada, which is currently being sued by the US Securities and Exchange Commission (SEC), has announced it will fire most of its staff.
Kik, a social media firm, created a cryptocurrency known as Kin and sold it off during an initial coin offering, which is essentially the crypto equivalent of an initial public offering in other markets.
However, it has now been hit by the claims from the SEC that it went about its capital-raising processes illegally – and contravened laws which existed in the US to protect consumers.
The issue is believed to be centred on whether or not the token offered by Kik was a security.
There are also concerns raised by the SEC that crypto was a last-ditch attempt by Kik to raise some cash due to financial problems which emerged around the company in 2017.
This possibility was described by one news outlet as a “Hail Mary effort”.
As a result of the ongoing wrangling between the firm and the SEC, Kik said that it would fire over 100 staff members and go down to just 19.
The chief executive of Kik, Ted Livingston, also founded the company.
He said in an internet posting that the move came from a desire to protect the nature of Kin as a non-security – and that the firm would “step forward and fight”.
“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”, he 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.”
The case continues.
However, Kik may end up liable to pay back large sums of cash which it acquired during its ICO if the SEC case is successful.
Busy week for SEC as other fraud case continues
The SEC was also involved in another alleged crypto fraud case this week.
It has charged a man name Jonathan Lucas, who operated an adult entertainment website, with claims that his initial coin offering was a scam.
Lucas ran Fantasy Market, and through that he earned around $63,000 from a hundred or so investors.
However, the tokens which he sold were not registered securities under the auspices of the SEC.
In a statement, the SEC alleged that Lucas “made numerous materially false statements in a whitepaper and online”.
They accuse him of lying about whether or not a beta version of the eventual platform for which the funds were being raised was ready to go.
He also allegedly told investors that a senior leadership team was in post – when in fact there was none.