KIN vs the SEC, an Interesting Wager

Apr 19, 2020 · 5 min read
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Win or lose, a monkey’s gotta eat!

If you’re not familiar, a few years ago the message app company Kik conducted a pre-sale of the token Kin to accredited investors, and later a Kin token sale to public buyers. The SEC insists that both actions were in fact one integrated sale of securities, and is in fact an illegal sale of securities.

There has been a back-and-forth, to-and-fro of legal actions, and reactions between both parties.

Now, a trial date set 2nd week in May, 2020:

“Oppositions to MSJ are due to Judge Hellerstein by Friday, April 24th, then a trial or settlement decision is scheduled for Friday, May 8th. (only 23 days from today!)” ~Reddit SEC v. KIK reminder…

Swing traders are already setting their trading plans. While court dates, especially in this age of coronavirii, may change, at least it gives a date to wager against.

News pop Crypto prices

As the old adage says: ‘Buy the rumor, sell the news.’ This kind of setup, a crypto token with a trial date that will define whether Kin violated SEC rules by setting up an illegal securities sale (or not) will define the legitimacy of the token. Kin is only available on the smaller exchanges, but a conclusion of a settlement payment, or even better: a win, would go a long way to getting Kin sold on a major exchange, and presumably a subsequent major increase in price.

Kin is determined to go to trial, so trial there will be.

Dissension amongst the ranks of the SEC

What is also interesting is Crypto’s ally in the SEC, Hester Pierce, aka “Crypto Mom” who rails against the SEC’s heavy handedness in cases such as Kin’s:

“…Of particular concern is that these enforcement actions and guidance pieces, taken together, offer no clear path for a functioning token network to emerge. Instead, I support creating a non-exclusive safe harbor period within which a token network could blossom without the full weight of the securities laws crushing it before it becomes functional.[16] By allowing legitimate projects to get their tokens into the hands of a broad set of developers and network users without fear of enforcement, we also would allow the SEC’s Enforcement Division to focus its resources on the fraudulent actors in the realm of crypto offerings.” Hester Pierce “Crypto Mom” at the SEC Broken Windows: Remarks before the 51st Annual Institute on Securities Regulation

Ms. Pierce seems to argue for letting things be, in regards to legitimate projects such as Kin. The SEC does not present a united front.

Win or lose Traders win

This has the makings of having something for any trader, regardless of their time horizons:

  • If you believe Kin is at fault, and will lose the trial, then you can short the token.
  • If you are a short term swing trader, then you can calculate the sentiment and “buy the rumor,” selling before the trial date. In the past week the price has risen from $0.000004, now up to $0.000009 — a 125% increase. A swing trader might think there is further room for an uptick prior to the trial. At the moment, $9 will buy you a cool million in Kin.
  • If you believe in the eventual triumph of Kin, and its long term prospects, then you might hodl long term, expect the win, and wait for placement in a major exchange such as Binance, Bittrex, or Coinbase. This would bode well for a retest of it’s highs of $0.0013, a 1,344% rise from its current $0.000009 price.

The fervent arguments against Kin seem to lump this amongst the other scam tokens such as Bitconnect; thinly veiled Ponzi schemes only created to profit the founders.

This argument though, would discount the efforts being made to make Kin, in spite of the uphill battles of adoption, technological rivals, and — oh yeah, a fight with the SEC — a viable universal token for the new world crypto order.

The accomplishments of Kin, despite the forces arrayed against it, are substantial:

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Unlike Ether, which was used in the past mainly for the creation of Altcoins, many with dubious backgrounds and pie-in-the-sky whitepapers (Ether’s World Computer anyone?), Kin is actually used as a token in 57 diverse apps and games.

Are you a true believer?

And as for those who believe that Kin is just an exit plan for its founders, why the heck would they insist on a trial, rather than just negotiating for a settlement, and a slap on the wrist the way did with EOS?

Kik only raised a mere 100M, compared with EOS $4 Billion. EOS infraction, and their mere 24M wrist slap, raises again the question of why Kik didn’t just go for the settlement, and argue, nay insist upon a trial?

Because they believe they will win.

They even divested themselves of their crown jewel, their free messaging app Kik, selling it off, and thinning their employees to a (hard)core group of 19 developers.

“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,” Livingston wrote in today’s blog post. “So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight….

Livingston added that because Kin isn’t available on most exchanges, it doesn’t rely on speculative demand. Instead, Kin is used by “millions of people in dozens of independent apps,” with more than two million monthly active users and 600,000 monthly active spenders, he wrote. Kik Interactive’s objective now is to increase those numbers.

” ~Tech Crunch, Ted Livingstone, CEO Kik Interactive

Since that article published on Sept 2019, within 6 months, the number of monthly active users increased more than double, from 2 million to 4.4 million.

Place yer bets

Whatever your time horizon, and whatever your belief — for or against, this is a trader’s layup. A trial date has been set, allowing for short, medium and long trade horizons.

Parties go to trial, not because of beliefs of innocence or guilt, but because they are arguable. Each side believes they have a case, and a judge believes there’s enough of plausibility to go forward to trial.

Slam dunk cases where the outcome is obvious rarely go to trial. They settle out of court, because it makes sense to do so. Trials, despite the confidence displayed on either side, can be won or lost depending on numerous factors: the skill of the litigators, the preponderance of evidence one way or the other, the juror’s emotions.

Yet, the lawyers always win, and the traders can as well. Place your bets!

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Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.


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