> First of all, you have to consider the SEC’s normal process for that sort of thing. It is very difficult and it takes a very, very, very long time for the SEC to give that kind of forward-looking advice, usually in the form of a no action letter. I mean, here we are in 2019 and they have only just recently released what I think is the very first no action letter relating to a cryptocurrency and that matter has been pending for well over a year.
> So it’s not practicable in a business that’s moving as quickly as this business was in 2016, 2017, to go and ask the SEC for a no action letter like that because the process just takes too long, and in a situation where in our view it’s quite clear that what we were doing is outside the scope of the SEC’s authority, we don’t generally think we have to go and ask the SEC’s permission to engage in business activity that is outside the scope of their authority.
> So it’s not practicable in a business that’s moving as quickly as this business was in 2016, 2017, to go and ask the SEC for a no action letter like that because the process just takes too long...
I empathize with what Mr. Gibbs is saying, and—if he speaks the truth—feeling, but it was Kik's choice to run a "quickly moving business" in a highly regulated arena.
People make the same arguments about security/privacy ("too much of a hassle in a quickly moving startup"), safety ("we can't afford to put two people in this test vehicle for autonomous driving") and so forth.
Kik might be right in this specific case, but in general "We're moving too quickly to deal with red tape" is not an argument.
First your citing the Cooley attorney who advised the company...of course he is going to justify his own legal advice.
It’s not going to look good when the court determines Kik knew if could have sought clarification from the SEC but didnt Because the SEC no Action Letter process wasn’t practical.
Let’s also keep in mind Cooley is the Firm that developed the SAFT (security agreement for future tokens) released their SAFT whitepaper into the wild telling startups to use their SAFT legal framework to raise money with ICOs legally and these are some of the first companies the SEC targeted for enforcement actions.
>Let’s also keep in mind Cooley is the Firm that developed the SAFT (security agreement for future tokens) released their SAFT whitepaper into the wild telling startups to use their SAFT legal framework to raise money with ICOs legally and these are some of the first companies the SEC targeted for enforcement actions.
They threw out some free legal advice and people used it?
I guess you get what you pay for.
I remember the story of the startup executive who thought he maybe got odd advice from his CFO about stock options but was assured that "this is how it is done". He went and asked a local attorney effectively "I don't see how this could be legal."
So they didn't do it, little while later his CFO had to resign, because they were going to jail for doing the same stock option (basically massive back dating) plan at another company.
Well Cooley’s free SAFT legal framework ended up with startups facing SEC enforcement actions.
>I guess you get what you pay for.
Then again, Kik, Cooley’s paying client also ended up in an SEC enforcement action (they claim they already spent $5M in legal fee prior to the SEC bringing the case).
I’m not so sure the issue is how much the clients paid for Cooley’s advice so much as the advice itself.
Hey... I'm not citing. I'm not even arguing. I'm quoting their answer to your question.
Supposedly Kik did seek clarification from the SEC and didn't get any. Then they received an enforcement action which is supposed to include details about the problems involved and the actions to be taken, but it contained none of those. Since then, they have been working for a year to get any kind of detail from the SEC, and the SEC has declined.
Personally, I think the root problem is that it seems the SEC is wildly under-funded and over-loaded. If a politician ran on a platform of election & campaign-finance reform + fund up the IRS & SEC; you couldn't call me a single-issue voter, but maybe a "2-issue voter" in that dream scenario.
I don't buy this argument from Kik for a second. The SEC might not always get back to you immediately but they sure as shit aren't going to lob charges your way when you're in the middle of working with them. In my experience they're very reasonable and willing to hear you out _so_long_as_ you're respectful, patient, and open to reaching a compromise.
A very, very long time. There's also the fact that they know very, very well what the general advice from the SEC about selling "tokens" to "investors" will be. (Their words, not mine.)
Patrick Gibbs:
> First of all, you have to consider the SEC’s normal process for that sort of thing. It is very difficult and it takes a very, very, very long time for the SEC to give that kind of forward-looking advice, usually in the form of a no action letter. I mean, here we are in 2019 and they have only just recently released what I think is the very first no action letter relating to a cryptocurrency and that matter has been pending for well over a year.
> So it’s not practicable in a business that’s moving as quickly as this business was in 2016, 2017, to go and ask the SEC for a no action letter like that because the process just takes too long, and in a situation where in our view it’s quite clear that what we were doing is outside the scope of the SEC’s authority, we don’t generally think we have to go and ask the SEC’s permission to engage in business activity that is outside the scope of their authority.
https://unchainedpodcast.com/kin-sets-up-5-million-defendcry...