Popular Canadian messaging app Kik is shutting down.
On Tuesday, Kik's CEO Ted Livingston announced that the company would be closing Kik as it shifts focus to Kin, its cryptocurrency business that is currently the focus of an US Securities and Exchange Commission lawsuit, and laying off more than 80 staff.
Livingston wrote in a blog post that its ongoing battle with the US financial regulator is one of the main reasons why it is closing Kik. "Instead of selling some of our Kin into the limited liquidity that exists today, we made the decision to focus our current resources on the few things that matter most," he wrote, adding that this meant shutting down the Kik app, cutting its more than 100 person workforce to a 19 person team, and focusing on converting Kin users into Kin buyers.
Kik launched Kin in 2017, and it was one of the most high-profile businesses to participate in a highly hyped wave of ICOs, or Initial Coin Offerings, a way of raising funds from investors for digital currency projects that are typically less regulated than traditional investment methods.
It raised a whopping $100 million — but in June 2019 the SEC sued Kik, accusing it of violating US securities law by not registering its ICO.
"By selling $100 million 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," Steven Peikin, co-director of the SEC's Division of Enforcement, said in a statement at the time. "Companies do not face a binary choice between innovation and compliance with the federal securities laws."
While the SEC alleges that the token sale was in violation of securities laws, Kik argues that its digital token 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. 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," Livingston wrote.
Kik did not immediately respond to Business Insider's request for comment.
"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," Livingston added.