Kik Shuts App, Faces Hoax in Tumult of Crypto-to-Messaging Shift
Kik Shuts Messaging App and Events Take an Unusual Turn
(Bloomberg) -- Beleaguered messaging app Kik Interactive Inc. isn’t giving up its fight with regulators so easily.
The company behind the Kin digital token announced this week it’s shutting down its messaging app and reducing its headcount to 19 people to better focus on its fight with the U.S. Securities and Exchange Commission for illegally raising millions through an initial coin offering, or ICO. The downsizing impacts more than 100 employees and their families, the company said.
“All is not well,” Ted Livingston, Kik’s chief executive office, wrote in a blog post late Monday. “With the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight.”
Then things turned strange. On top of its regulatory troubles, Kik’s CEO became the subject of an apparent hoax. Rumors swirled online that he was close to quitting the start-up after the crypto media outlet CoinDesk reported him saying so to a reporter via text message. Livingston denied the comments on Twitter, saying the story was “obviously fabricated.” CoinDesk has since retracted the story, saying it was victim of a deception. The news site declined to comment further.
The changes announced Monday will reduce the company’s cash burn rate by 85%, Livingston said in the post, “putting us in position to get through the SEC trial with the resources we have.” The remaining team will focus on converting Kin users into buyers, he said.
The Ontario-based company fell into regulatory cross-hairs over the summer when the SEC sued it for illegally raising $100 million through a 2017 digital token sale. After losing money for years on its messaging product, Kik raised more than $55 million from U.S. investors by selling the digital token without proper disclosures, the SEC said in June. Kik launched a crowdfunding site called DefendCrypto.org to raise funds for its fight against the commission. It’s raised more than $1.6 million so far.
The fight came in the midst of the ICO bubble when start-ups raised billions selling tokens which bypass traditional public offerings of shares -- a process typically overseen by the SEC. But the regulator has cracked down, saying issuers in most cases must register the deals with the government. ICO promoters had argued their coins were utility tokens that buyers could use in services provided by their business.
The SEC accused Kik of offering a coin after running low on cash to fund its operations in 2017. Kin’s market capitalization has dropped to about $6 million, down from more than $900 million in 2018, according to data from CoinMarketCap.com.
“No matter what happens to Kik, Kin is here to stay,” Livingston wrote. “We are all in. And despite these hard decisions my confidence in Kin only continues to grow.”
To contact the reporter on this story: Vildana Hajric in New York at vhajric1@bloomberg.net
To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka
©2019 Bloomberg L.P.