The Kik Answer

I have mentioned the legal case between USV portfolio company Kik and the SEC several times here on AVC, most recently here.

Last night Kik filed a 130 page Answer to the SEC and made this press release.

The story was picked up by Coindesk and other news outlets.

I am not going to get into the details of this matter here on AVC, but this is not an open and shut case by any means.


Comments (Archived):

  1. awaldstein

    Been following this loosely from the outside.Look like a contentious really ugly process.Gotta wonder as a question whether from a pure company perspective whether this was the pragmatic approach. Nobody puts themselves through this kind of expense and pain for an altruistic motive so obviously there is a ton I don’t and will never know.

    1. William Mougayar

      Arnold, Kik is fighting this for the industry, not just to defend themselves. (See my take on it) Change is costly.

      1. awaldstein

        See above.I’m all in that what they are doing is important generally.And I/all of them should and many do support them.Positioning though is misguided in my opinion is all.

        1. William Mougayar

          What should it have been in your opinion?

          1. awaldstein

            Authentic and honest is always the best position. They are fighting for their life, say it as such.

      2. JF

        Kik is a non profit organization?

  2. William Mougayar

    This is a harbinger case for the blockchain industry in the US and Canada, and potentially worldwide. Regulatory clarity will come at an unfortunate price. I published my thoughts on this case this morning, http://startupmanagement.or

    1. WA

      Great piece William. Looking forward to deep diving the links later today

    2. awaldstein

      I read your post and thanks for clarifying thoughts from an insider.Need to say that the talking point that they are doing this for the common good rings false to me.The result may be important of course but they are not a non profit org like the ACLU but a private company and that story line is not genuine and detracts from the narrative.

      1. William Mougayar

        Hmm. Read SEC Commissioner Peirce’s last speech in Singapore (I link to it). By her own admittance, the SEC is guilty of not providing clarity and dragging their feet on coming up with updated token regulation.

        1. awaldstein

          I am not questioning that this is a landmark case.And am not going to put in the time to be specific about who is doing what though I do not doubt at all that the SEC is screwing around with this with less than upfront intentions.Industries and causes throughout history have given their support to landmark cases whose result is important to an industry or even more important to human welfare.I just find the narrative that the motivation is altruistic here unnecessary and distracting to gather industry support.I support them. I simply dislike the narrative.

    3. Matt A. Myers

      Edit to add:This case could take years – and perhaps it should.If the macro view is that certain structures mimic Ponzi-Pyramid schemes, if the detailed, micro scope/view response doesn’t include this – navigating with mental gymnastics to avoid designing regulation to prevent Ponzi-Pyramid schemes in allowable structures, then the response is moot.To be fair, the majority of people will not understand the 131-page response by Kik – and will have to learn about a whole, very complex system. Thankfully there is a financial regulatory body developed because of historical bad actors – people who are paid to review this situation efficiently – and have been doing this presumably for a long time; hopefully they haven’t been or won’t be corrupted either – however that’s always a possibility. In contrast, as I say below, Kik et al (the crypto-“currency” global, decentralized, organization body) are heavily financially incentivized, paid to, and projecting to insane amounts of unnecessary wealth transfer to the earliest adopters of these systems if they can just keep this structure open and flowing.The funny thing to me is that even if the Pyramid-Ponzi scheme structure is solved, I don’t think competitively there is a competitive advantage to compete with existing technology; blockchain has some good, specific use cases – but the majority of everything can be done without it, and for where it does work, it doesn’t need the structure that crypto-“currencies” follow.An optimistic view is that it will end how it should: keeping people, society, and their money protected from unnecessary gaming of systems or transfer of wealth by trying to takeover the transactional data layer with Ponzi-Pyramid scheme structures.It’s interesting how the term blockchain seems to be being used more – when in reality they’re including referencing protecting the Pyramid-Ponzi scheme structures like crypto-“currencies” follow.Blockchain has benefits, Ponzi-Pyramid schemes don’t – except for the earliest adopters.Whether there is any justice or consequences for those cleverly pulling levers to avoid financial regulation, is another question, and based on the status quo – unfortunately unlikely.Edit to add: This is a fight similar to that with UBI. UBI’s a prime example of a system that should have been implemented long ago, however the greedy powers that be prevented it. If Andrew Yang is elected – or another candidate who does implement UBI after Yang’s eloquently educating politicians and population about it – then it will be a sign of the times, a signal, of how quickly information is able to be disseminated now to educate people about these issues. To teach them about these complex, holistic systems, that many don’t have the ability – or haven’t had the time – to critically think through to discover this understanding on their own. With crypto-“currencies” this is the same – except the greedy powers to be are all financially aligned, globally, and in a decentralized way. So there is literally the self-called “army of HODLers” who positively promote their flavour of crypto-“currency” scheme – refining language and approach as people understanding evolves.In contrast: No one is financially incentivized to counter these Ponzi-Pyramid schemes however, and responding to anyone in the “army of HODLers” who hasn’t decided on their own to stop engaging in conversation – is a shit show, not overly pleasant experience. However once the message clearly gets articulated and through a strategy that is consumable for laypeople then the “bubble” will start popping. Even then however, post “bubble” popping, this structure is still manipulable – people gaming the system, to rise the “perceive value” or current selling cost. Really it’s just a bad idea to allow this behaviour – to incentivize, reenforce this bad, greedy behaviour to move any level wealth unnecessarily from earlier adopters to later adopters; I always like to jump to the thought exercise of what happens when 50% of the global population has adopted this Ponzi-Pyramid scheme structure, and what that wealth transfer looks like for the last 50% – only conclusion is it’s not going to be fair or reasonable, as no concrete reason will attributed to the price they are buying to “buy into” the system.

      1. Michael Elling

        Overall I agree with crypto assessment. However UBI, as an “average” sharing of network value is not sustainable. We need a model of transaction settlements that is more insidious within and between networks (internetworks), so as to provide the right incentives and disincentives at the margin. That’s the only way to efficiently clear supply and demand. What are the incentives or disincentives contained in UBI?

        1. Matt A. Myers

          I will edit in some paragraphs later if you want to wait before reading this:It allows a closer mechanism towards free market. $1,000 / month to every adult will create a huge new market to be competed for, organizations attempting to capture as much of that market as possible. It will lead to instead of government pools of tax money or the VC industrial complex deciding where money goes – it will be counterbalanced and inject money where people are voting with their dollars. The systems that are more efficient will be cheaper – will include automation, AI – and therefore will direct even more capital to those firms that are the most efficient. The incentives and disincentives will work themselves out, hopefully not too much by way of Darwinism. There are far too many positives that cascade into reducing counter-productivity in society to list without writing a book, that highlight the externalities that aren’t accounted for, the dis-ease progression that is eliminated; you can tie it all back to Maslow’s Hierarchy of Needs, along with the industrial complexes that have developed along with their regulatory capture – including the matrix of how these complexes have evolved to supporting their own structures. Regardless if UBI is implemented because of Andrew Yang – or adopted by another victorious candidate, these systems to counterbalance the destruction of these complexes, the scarcity mindset society has been brainwashed into since profit, greed was able to scale with the advent of automation – eliminating “costly” people from their bottom line equations. Elon Musk is a prime example, and like the unhealthy – damaging – industrial complexes that increased in their power, strength, influences, as they evolved to work together – the more systems that are required for basic survival, covering all facets of allowing individuals to move up the Maslow’s Hierarchy of Needs – the exponentially faster the yin-yang balance will cycle the other way amplifying and scaling these positive, healthy complexes. Trump is a symptom as Andrew Yang correctly identifies – and the leading metric solution is #1 UBI – and another policy of his, which I believe is #2 – not that he says it as such – is ranked choice voting. I have a plan, vision, to bring a layer of fluidity to the internet that should exist – except it seems everyone’s been too busy, or hasn’t had the necessary life path, to lead them to the conclusions I’ve reached. In the last few days alone I’ve modified one of the coping mechanism routines to deal with the chronic pain I have – and have successfully slowly been healing over the years with stem cell treatments, the next being August 29th – where it’s allowed my focus, concentration, and productivity to take a nice jump – where at least I can feel stable and certain enough, and executive function not so constantly disrupted that my thinking is fluid throughout most of the day. I believe it was Elon who said this, though I haven’t verified – he said that people in general are terrible at exponential predictions, and he’s right: there seems to be very few who have the mind at the moment to view or accept these holistic, long game predictions. With systems of automation accelerating the development and capabilities of the physical world, you’re right that we must carefully manage, guide people away from the potential harmful effects as efficiently as possible, too. Much like how the internet and social media platforms reached scale for us to learn of the power of it amplifying the efforts of bad actors, of the manipulative, the greedy – there will be a counterbalance that will rapidly reenforce guidance towards a safer and safer, more and more secure a path for everyone to follow. A protocol. Governance is the final layer of competition which comes from trust, which comes from building relationship – which comes from role modelling, educating people in a passive way leading by example, and in an active way to help them learn and understand these complex systems. As early adopters gain benefit from their experience, interaction, engagement – more and more will start to follow – and that too will be amplified by the social media infrastructure that bad actors have had financial incentives to learn how to leverage before the majority of everyone else. I am relaunching an older project of mine soon – a platform, a restaurant menu listing site August 15th – hopefully it’s ready to be live by then, and how efficiently I am relaunching that, the low cost, its quality and MVP (Minimum Viable Personality) it will have even surprises me; once again I’ll state humans are generally bad at predicting what can happen with exponentials, how quickly or how much can get done. I’ve focused on relaunching it this past month as it’s about 1/20th the size of the MVP of the other project I have more passion for, that has 80-90% of the polished designs I’ve completed so far, however it’s much more organizational intensive – and I know I need to heal the injuries in my body further before I can reasonably try to handle that. I may not even have the funds available to launch the private user beta testing, as stem cell treatments are expensive currently, ~$10,000+ USD I’ll spend including travel for the August treatment, and another ~$28,000 USD for a more ideal one I am organizing for February – and I hope to squeeze another less expensive treatment in November if I can afford it all. I’m not rushed though. Pain, suffering is the greatest teacher – and it’s been beating into me patience, discipline, letting go of expectations. Worst case scenario at the moment is if I don’t have the money to move projects forward then I can continue with design work, and a presentation outlining what I am capable of with the relaunch on the 15th. I prefer to have enough resources though so I can continue with that main coping mechanism of having work I’m passionate about to distract myself from the pain. I don’t know how many more stem cell treatments I may need, nor if all of the pain sources can be treated, or what my end baseline for my nervous system’s stress and sensitization tolerances and recovery time will be – I used to hope the tipping point was coming “next treatment” – however that was setting myself up for failure and difficulty emotionally with that inkling of expectation.

          1. Michael Elling

            Agree with a lot of what you say; that said our means to achieving similar ends differ.Networks reduce risk (which is the contra, but not complete opposite of trust. 100% trust can never be zero risk.) These networks, following tried and true rules or tenets of networks, require “terminating” settlements that provide signals for incentives and disincentives as well as value redistribution to assure sustainability and generativity of the ecosystem. They are also the best way to assure efficient sharing (resource allocation), thereby clearing marginal supply and demand most efficiently. Governments do not do this well. UBI ultimately imbalances risk in that it is a 1-way transfer.The best way to understand this is that 50 years on from LBJ’s Great Society, we have a world where no one is responsible to anyone else other than their immediate family and friends; even then that’s often less true than not. People and institutions feel entitled at every layer and boundary in our society. In the end, it’s not a money issue, rather what network system we want implement. Reduced risk leads to increased trust; not the other way around.

          2. Matt A. Myers

            Government simply distributes money, they aren’t the ones to counterbalance risk or access for it – the decentralized society, and for-profit mechanism of the capitalistic layer will allow this, save regulatory capture, built-in friction, etc.. People will learn to trust what ecosystem(s) by different organizations and governance, leaders, and there will develop a competition between ecosystems – that will be all about trust building, education, health, etc.. If we just assume society and competition won’t realize they can fill a need to help people becoming healthier more efficiently, to thrive more easily, learn more easily, etc. – then yes, we’d have to worry because the equation couldn’t be closed; unless I am misunderstanding your concern?Community is evolving. We used to be greatly dependant on each other developing and evolving to be highly social, story telling beings to transfer skills, knowledge. Then physical money and capitalism accelerated the process of dividing us, siloing us in part through controlled abundance because it was so available to buy your own house, vehicle, etc. and no longer needed to live with extended family – in part education and specialization did this as well, in part bigger opportunities leading to people needing to move to centralized hubs of innovation or where work is, etc.. It is going to rebound however because of technology and an abundance mindset. We have a loneliness, isolation problem that is relatively easy to solve. We have a time cost problem due to distances that doesn’t allow for an even playing field of mobility for where you live – Hyperloop/Loop technology greatly solves this problem.The foundational network we want to implement has to be towards the free market, a safe version of it – where it is a safe-minded of course, allowing a safe playing field for capitalism and competitiveness to do its highly efficient dance. There’s a difference from 50 years ago too – being internet, automation, AI – and where money we already see is funnelling towards rapidly. We’re only just waking up to why we’re losing our jobs, the strongest belief being from China and “immigrants” is another current chant, however it’s clear it is automation; Amazon being the main reference Andrew Yang makes.”Reduced risk leads to increased trust; not the other way around.”What you’re saying here is that the ecosystem that proves to people, shows us that there’s reduced risk – compared to status quo, competitors – will gain people’s trust faster, and allow that ecosystem to grow at an exponential rate as risk-reducing functions (research, adequate measurement, etc) and relationship/trust building accelerate – leading to a double-whammy positive feedback loop. Sounds fantastic to me! :DEdit to add: Yes, there may be an acceleration of risk taking behaviour due to some people having access to money they’ve never had before – however I believe people will learn quickly too. Likewise, they will have funds to pay for health-related services (etc). One argument I really like is relating to the homeless. If a not-for-profit or charity provides services for the homeless (or anyone), knowing that they have at least $1,000 / month adds incentivizes for them to be able to help them; obviously someone will need to monitor services provided for value given (and results/outcome reached), however we already have volunteers working for not-for-profits and charities doing this kind of work already – because people care – some with more time or a more open heart than others, but generally we are a caring, empathetic, social creature.

          3. Michael Elling

            Govt doesn’t just redistribute money. “It” provides for defense and is the final say for how ALL of our socio-economic and political institutions are set up. That’s really really really big responsibility and I think It has shown repeatedly that It is not up to the task; particularly now. But don’t just take my word; that guy Plato had a few ideas about It.

          4. Matt A. Myers

            Re: Gov redistributing money – was in reference to UBI only, and exactly my point – and Andrew Yang makes the same one: who do you trust more to make decisions about your money, yourself or the government?

      2. JLM

        .”If Andrew Yang is elected . . . “Haha, you actually wrote that, right? I didn’t dream that up, no?Of all the things that may burden us, that is not one of them.JLMwww.themusingsofthebigredca…

        1. Matt A. Myers

          Love ya JLM. 🙂

  3. Tom Labus

    This will cost Kik a fortune and possibly their business. First through always gets pounded.

    1. awaldstein

      They are fighting for their existence.We all love the underdog with broader impact.That is the characteristics of landmark cases and why people should give a shit.

      1. Tom Labus

        My concern is the merits of the case will be tossed in favor of whatever the political flavor of the day happens to be!

        1. awaldstein

          Dunno.I don’t know the inside story as in how much and the restrictions that they were offered and why they went this path.I do know that this is important for the segment.I also know that when you publish your Wells Response (which almost no one does) you are declaring war and expect only the very worse which is what is happening.Important. Aggressive. No complaining allowed.

          1. JLM

            .A Wells Process is confidential for the US SEC, but the defendant can do whatever they want with both the Wells Notice and their Wells Response.The Wells Process has been around for almost half a century and ensures that a target knows exactly what behavior they are being held accountable for. Nobody gets anything equivalent to a Wells Notice if they are marched in front of a grand jury.It is a preliminary step before being formally charged. No other arm of the Executive Branch provides such an opportunity to explore the charges with an eye toward a negotiated settlement.Most Wells Process confrontations result in a negotiated settlement which is why the US SEC’s success rate at trial is so high.One of the big things a defendant gets from a Wells Notice is an assurance that in subsequent activities the charges against them will never expand further than the breadth and depth of the Wells Notice.By making the Wells Notice and the Wells Response public, the defendant diminishes the ability for the US SEC to compromise by extending an olive branch.A Wells Notice and a Wells Response does not carry with it the legal power of precedent, so making it public does nothing for anybody else but the defendant.You have to question the wisdom of picking a public fight with somebody who has no financial limitations.It feel like an ill-advised punk move.JLMwww.themusingsofthebigredca…

      2. Matt A. Myers

        People should be giving a shit about the poor as well, only now is a time that UBI has a chance in hell of becoming implemented.Even then, if there’s some “positive” result of this legal case with Kik, there will be a yin-yang counter action – people who aren’t financially incentivized in these Ponzi-Pyramid schemes, but who are morally driven for what is fair, reasonable, and to counter greed – to help protect those in society who don’t know any better or are more easily manipulated.

        1. awaldstein

          not following this at all.

          1. Matt A. Myers

            TL;DR version is: things can take time before people, society, is protected from bad actors or greed, greed perpetuates faster because of the financial motivation, incentive for results – whereas learning and truth, non-indoctrination, seems to come as a response to suffering; we weren’t awake until Trump became President – now light is starting to shine more and more brightly on the mechanisms that allowed that to happen.

    2. pointsnfigures

      at CME when we wanted to be first to demutualize, we waited a year and a half for an IRS decision on the tax implication of demutualization

    3. Matt A. Myers

      Well, they got indoctrinated into all the hype – there’s pain that comes from the lessons you’ll learn from that.

  4. Mark Gavagan

    A quick read of pages 2 and 3 of Kik’s response appears to show some very intellectually-dishonest cherry-picking of where to begin and end quotes.

    1. Matt A. Myers

      Lawyers gonna lawyer….”I know it looks like an orange [it’s an orange] – but if we look deeper, inside of it [the orange], it’s clearly not an orange [because we’ve conveniently narrowed the scope].”

      1. Mark Gavagan

        Of course there are some rascals everywhere, in every field, but what I read in Kik’s response does not at all square with what I read in former U.S. Attorney for the Southern District of New York, Preet Bharara’s book about their very high standards for how and when to prosecute.I hope it’s all resolved quickly, justly and inexpensively…

        1. JLM

          .Haha, I would be more concerned about Preet Bharara’s ethics than the US SEC’s. He’s a piece of work.Harken back to the manner in which our government took up a 12 year old case that the DOJ had passed on to put Paul Manafort’s tit in a wringer.How about a pre-dawn raid on an old, tired fart like Roger Stone — guns drawn raid on a guy whose lawyer would have delivered him to an arraignment at any time. The lawyer had offered in writing to deliver his client months before.This is who our government is the second they get into the FBI/DOJ. They deploy Mafia type tactics on what are white collar criminal cases.JLMwww.themusingsofthebigredca…

      2. Richard

        The longer the brief, the more likely it’s an open and shut case.

  5. pointsnfigures

    curious what sort of background the attorneys have. are they contract type lawyers or litigators?

    1. awaldstein

      really good take on this on tuesday’s Unchained podcast with being interviewed was super knowledgeable, conservative, and with a great view of the law and governmental landscape on this.i didn’t really understand how dramatically kik flaunted and declared war with publishing the Wells Response till I listened to this.

    2. JLM

      .These are all securities litigators on both sides. Many of these guys go from the government to private practice and back again, and again, and again.They all know each other.JLMwww.themusingsofthebigredca…

  6. jason wright

    At first i thought it said “…and made this pressure release”. It’s blitzkrieg time or die for Kik.I thought the last time this was discussed the consensus was that as Canada has declared it to be a security (and Kik then chose not to issue it there) that Kik knew it to be a security but went ahead and issued it in the US regardless.

  7. DJL

    Painful when the full force of the US government comes at you to make a point – valid or not. They can keep spending on lawyers and we pay the bill.

    1. Matt A. Myers

      Protecting society is the key role of the government. This process could all just be for show by corrupted regulators – or they could have and hold integrity.

      1. DJL

        Understood. But as we have seen with Russia-gate, sometimes the regulators need regulating. I have no dog in this fight and am certain that many ICO’s were essentially Ponzi schemes. But “intentional” or not is big deal.

        1. Matt A. Myers

          Ignorance is bliss certainly will be the defence of many.

        2. JLM

          .Allow me a small quibble. The issue of “intent” is only pertinent when the facts themselves prove the crime. As an example, the issue of “obstruction of justice” requires an extensive set of “proofs” of which one is specifically the intention to obstruct justice. This was at the core of R Mueller’s inability to make a charge of obstruction of justice against Pres Trump. If Pres Trump honestly thought there was no underlying crime — collusion — he could not meet the requirements of intent.One cannot intend to obstruct something that does not in that person’s mind exist.OTOH, there are crimes that are simply binary. An example is the affirmative duty to safeguard classified documents. I once worked in a shop wherein docs were safeguarded in a safe and could only be checked out to an armed individual. Such a document was found under the desk blotter of a very good man, but it was not directly under his control.The man had absolutely no intention of allowing that document out of his oversight and control. In fact, the room itself was secured. He went to the bathroom, forgot he had put it under his blotter, and that night when the inventory was done — voila, he had committed a felony — failing to safeguard classified information.These fact driven — affirmative duty — crimes do not require any finding of intent.This is true of most money related crimes in the securities arena. You have an affirmative duty to do something rather than a safe harbor of good intentions.If you file an S-1, the US SEC approves it, then you have a presumption of having done it correctly, a safe harbor. No similar US SEC approval? Then the issue of intent is the least of your problems.This is the arena Kik is in.JLMwww.themusingsofthebigredca…

          1. DJL

            Understood. I do not have the intelligence or patience to analyze these situations as you do.Mine was an every man’s assumption. A lot of people raised money in ICOs that had no real market and no business plan. Were they trying to deceive. optimistic or just desperate? Nobody knows. But this situation is definitely at another level. A appreciate the insight of everyone here.

  8. Mike

    The Securities Act of 1933 followed the stock market crash of 1929 that lead to the Great Depression. The purpose of the Act was to ensure transparency and reporting standards to protect investors from misrepresentation of investible securities, and protect from the resulting systemic risks. I am sure crypto assets were not a consideration, but the intent remains.Is Kin a Security or a Currency, or something different? This is a whole new world and I hope this judgement supports fairness, transparency and a healthy, well functioning marketplace for crypto or any other asset.

    1. JLM

      .Cart v horse position issue.If you are going to raise money from the US public, there are rules that must be followed. If you fail to follow the rules, there are consequences.Start with the money.What the money is being used for is almost a secondary consideration.JLMwww.themusingsofthebigredca…

      1. Richard

        It’s the issues that make the brief. The most significant fault of briefs is attempting to knock-out some some irrelevant preliminaries – it’s a sign of a desperation.

        1. JLM

          .A great man does not stop to throw rocks at every barking dog on the path to greatness.A general denial is the mark of a defendant that is ready to go to trial.A 131-page Answer is the mark of someone being paid a high hourly fee.JLMwww.themusingsofthebigredca…

          1. JamesHRH

            Its the little things that are the tells b/t pros and ams.

      2. Mike

        If Kik is within the intent, if not the letter, of the regulation due to the unique nature of their crypto offering then perhaps there is an opportunity for a mutual understanding, or precedent for a future understanding. The rules can evolve and adapt, the intent probably not so much.

  9. creative group

    CONTRIBUTORS:there are respected investors who are early adopters of crypto-currency who not only have a financial stake in Kik but a reputation to uphold. Being associated with anything labeled Ponzi-Scheme is a tainted association which no one would want to be linked.The vigorous defense of Kik will continue because a lifetime of creating a foundation based upon trust, integrity and morals are at risk and not to mention the financial interests.The beat goes on! Obvious!#UNEQUIVOCALLYUNAPOLOGETICALLYINDEPENDENT

    1. JLM

      .The investors in crypto companies have the same track record in those investments as normal venture capital — 50% success rate at the top end.To suggest that trust, morals, ethics, integrity is what is on trial here is nonsense.This is a cut and dried securities offense.If you want to change the law, you go to Congress, not court.JLMwww.themusingsofthebigredca…

  10. Salt Shaker

    Time (and resources) is on the side of the SEC. Wonder if a summary judgment is an avail option? Seems to be an awful lot rhetoric here on both sides, btw.

    1. JLM

      .You would never get a Summary Judgment on a case this complex.SJ is only granted when there is no “material dispute” as to fact and that the resolution is simply a matter of law, the application of law.The defendant, by their Answer, does not remotely suggest that there is no material dispute as to the facts. The Answer would be Exhibit 1 in denying a Motion for Summary Judgment.This is covered in excruciating detail by Rule 56 of the Federal Rules of Civil Procedure. There are three cases that are always cited ad nauseum.The defendant can file a Request for Dismissal based on the Feds not meeting the mark as to stating a case that is a crime. Good luck with that.If the defendant was going the Motion for Summary Judgment or Dismissal route, they would have filed a general denial.JLMwww.themusingsofthebigredca…

  11. @mikeriddell62

    “From the time of its public announcement through the TDE and today, in line with itsvision, Kik has promoted Kin as both a currency for use in consumer’s daily digital lives and as the basis for a new digital economy, anchored by the Kin ecosystem.” It’s not hard to see why the status quo feels challenged by the newbie. Some things are better left unsaid.And to be hacked.

  12. Drew Seath

    @fredwilson I know you love basketball and KickStarter. I saw this today. A nomination for this week’s Funding Friday.…(NB: I have no relation to the company. I saw the article and thought it was a cool idea. I haven’t backed it yet because the beach by me is pretty sloped, but I want it!)

  13. JLM

    .Yawn. This is a pretty standard, overblown, over-lawyered regulatory duel.First, the United States Securities and Exchange Commission does this stuff every day of its existence. They have a number of processes — the Howry Test, the Wells Process — that provides a defendant with the opportunity to lay out their case. Everybody has seen the other guy’s case and the guys who do this all the time said, “Let’s tee it up.”Know that the US SEC thinks they are on sound ground and they do this stuff all the time.In this instance, that is all that happened. There is nothing really innovative or novel at work here from a regulatory perspective. The US SEC says that Kik/Kin failed to follow the American securities laws. Yawn.Despite all of the blather about how crypto should be regulated differently — none of that is at stake here. What is at stake is a set of laws that are very well litigated and known. If you want to change the laws, you go to Congress, not to court. Read that sentence again.Now a Manhattan jury will decide who is right. Ponder that for a second.If they decide that the US SEC — which wins about 97% of these cases, the balance are settle during the litigation — is right, there will be consequences including refunds of monies raised, fines, penalties, and the potential for individuals to be banned from the US securities markets for protracted periods of time.Please do not suggest for a second that the US SEC — having been through direct negotiations, the Wells Process — did NOT overcharge. This is what regulators/prosecutors do. They always overcharge. Put some baby powder on that rash and move the fuck on. Prosecutors always overcharge because they can and because they are giving themselves a chance to get lucky.Spare me your hurt feelings that somebody failed to use part of a quote. That spokesperson will get their opportunity to answer questions from friendly and unfriendly questioners at the trial. This is not going to turn on the completeness of somebody’s banal utterance.It is sort of amateurish to answer a complaint with a detailed recital and rebuttal of each and every charge in the Complaint. Experienced litigants issue what is called a “general denial” — thereby denying the charges in their entirety without limiting the playing field by revealing their defense at trial — and saying, “See you in court. Good luck proving your case.”While the Complaint and the Answer are interesting reading, they are not evidence. Evidence — testimony, documents, filings — is what will be required to prove the allegations. The evidence must be presented in the primacy of first hand testimony, documents. The SEC has to tell the defendants what evidence they will use at trial before the trial.Without putting my thumb on anything, I just caution folks that there is a shit pot of evidence out there. There are documents, offering docs, videos, and there are witnesses who received all that evidence.The worst thing involved here is that this case will be tried in front of 6-12 persons of limited education who will undoubtedly not know a damn thing about crypto. If they do, they are likely to be struck from the jury by one side or the other using a pre-emptive challenge.This whole technical confrontation will be determined by a handful of poorly educated knuckleheads who will quickly decide which set of lawyers they like and which persons they do not like. That is an unfortunate reality of our legal system when it comes to complex business litigation.When jurors do not understand something, they always vote against it because it would otherwise be an admission that they are dumb. Trust me, there will not be an average of one year of college amongst this jury.The people involved with the company are at risk and their opinions are suspect.Freddie is the Chairman of the Board of Kik and Wm Mougayar is a trustee of the Kin trust. These are guys with skin in the game and an edge to what they have to say. Honest guys. Smart guys. But, conflicted guys. <<< This is a legal issue, not a moral one. Leave the morality to others.There is a lot of altruistic virtue signalling with a lot of drama about the future of the blockchain, but this is really just a garden variety securities case in which the US SEC has the advantage of having done this stuff thousands of time and winning 97% of these cases.Good luck to all.JLMwww.themusingsofthebigredca…

    1. William Mougayar

      Thanks for the good wishes JLM, and I can’t say that was a dull comment.

    2. sigmaalgebra

      Good to know. A keeper. Thx. Lessons: (1) Stay out of legal cases. (2) Don’t have a C-corp. (3) Stay away from crypto. (4) Keep head down. (5) Keep business transactions just dirt simple with little or no chance of legal fights. (5) Avoid assets with multiple owners. (6) For a business, have an LLC with just one owner. (7) Generally, not all business directions, situations, strategies, etc. are equal; avoid ones that involve lots of lawyers. (8) Generally in legal cases, with rare exceptions, the lawyers win and everyone else loses from a little to a lot. (9) Mostly it’s a dog eat dog world with the devil taking the hindmost. (10) Lots of animals, e.g., raccoons, have the right idea — exploit stealth. So, stay out of sight, (11) Generally the extent to which our civilization is civilized is overrated.