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SEC files lawsuit Against Kik Messenger

Follow Yassine on Twitter @yassineARK


The U.S. Securities and Exchange Commission (SEC) is suing Kik for conducting an Initial Coin Offering (ICO) of its Kin token in 2017. The SEC alleges that the ICO was in violation of the Securities Act of 1933 and did not register its offer and sale as required by U.S. securities law.


In the filing, the SEC highlights Kik’s timeline of activities related to the ICO, including internal emails with Kik employees, private meetings with Kik stakeholders, and specific reports given to Kik’s board of directors.


The lawsuit alleges that Kik conducted an ICO primarily to fund its existing business operations. As the filing suggests, Kik had never been profitable and was at risk of running out of money in 2017. Unable to raise capital through traditional means, Kik would go on to conduct a token sale, viewed by many as a last resort “Hail Mary pass”.


Kik sold its Kin tokens to the public, marketing the sale as an investment opportunity. The company informed investors that a demand in Kin tokens would drive its value. Kik expressed intentions to spur demand "by incorporating the tokens into its messaging app, creating a new Kin transaction service, and building a system to reward other companies that adopt Kin.”


While it is unlikely that the lawsuit against Kik will be resolved any time soon, the investigation will help further shed light on the SEC’s view of unregistered token sale offerings and prompt new discussions around the application of securities laws to cryptoassets.


Kik will likely not go down without a fight. As The Block notes, “If Kik can draw a distinction between its case and other ICO lawsuits that ended with companies accepting penalties, the firm might be able to lend itself in a more favorable position.”



CashApp’s Viral Marketing Approach

Follow Max on Twitter @mfriedrichARK 


Square's Cash App appears to have a unique marketing strategy that uses viral platforms such as Twitter, various podcasts, and even e-sports teams to acquire users at a very low cost today. Some examples of this strategy include Cash App’s recent partnership with Burger King on Twitter, during which Burger King payed for random users’ student debt via the Cash App. Burger King’s tweet subsequently went viral, counting nearly 100,000 user replies. Cash App also sponsors a number of podcasts, including the Joe Rogan Experience and Barstool Sports’ “Pardon My Take”. As part of another partnership with 100 Thieves, the e-sports teams, its founder handed out money on Twitter via the Cash App. Rappers Lil B and Travis Scott did the same in late 2017 and August 2018, with over 120,000 people commented on Travis Scott’s tweet.


Cash App’s own marketing effort on Twitter, “Cash App Fridays”, appears to be gaining momentum as well. Every Friday the official Cash App account sends out a tweet for other users to comment on with their own Cash Tag, allowing them to win funds via the Cash App. Over 80,000 people commented on May 24, when the company gave out $10,000 to random Twitter users. Cash App’s recent engagement on Twitter indicates that the Digital Wallet operator should be able to retain last year’s 115% year-on-year Monthly Active User (MAU) growth. In 2018, the “Cash App Friday” campaign saw only a fraction of the engagement it receives today.




This marketing approach allows Digital Wallets, such as Cash App, to acquire new users for roughly $20, while traditional banks pay between $350-1500 per new retail checking account. Investors value traditional bank customers at about $3,400 per account. At 200 million estimated US Digital Wallet users by 2023, the Digital Wallet opportunity could be worth $700 billion in the US alone. ARK believes low customer acquisition costs are central to future profitability of Digital Wallets, as laid out in ARK’s recent blog.


Is Apple acquihiring

Follow Tasha on Twitter @TashaARK


This week we learned that Apple was interested in acquihiring, the autonomous vehicle startup. Last May became the second startup, behind Waymo, to start testing autonomous vehicles without a safety driver. However, the pilots that later launched in Texas looped safety engineers back into the picture. This year reports surfaced that has been searching for a buyer for additional capital. Perhaps, like many players in the autonomous vehicle space, is having trouble commercializing and solving for the last percentage points of full autonomy. Apple’s autonomous driving project has had a chaotic history, including layoffs earlier this year. It will be interesting to see if this deal goes through and gives a window into Apple’s autonomous strategy.


Robots and Drones: The Two Biggest Takeaways from Amazon’s re:MARS Conference

Follow Sam on Twitter @skorusARK


This past week Amazon had its first ever re:MARS conference, which focused on machine learning, automation, robotics, and space. At the conference Amazon debuted two new warehouse robots and revealed that it now has 200,000 robots deployed globally. Over the past two years Amazon added 100,000 robots, while simultaneously hiring over 300,000 employees, nearly doubling its human workforce.


Amazon also unveiled a new design for its delivery drone. As shown below, Amazon’s drone design appears similar to the design of Opener’s Blackfly air taxi. Both drones use fixed rotors attached to the body of the craft at an angle. The fixed rotors reduce the possible points of failure, while the angle of the rotors optimize the craft for horizontal flight. ARK expects more drones and air taxis will converge on this design going forward. Equally exciting is the announcement that Amazon received FAA approval for limited testing and said it expects to start deliving packages within months.




CRISPR Twins’ Lifespans Could Be Shortened

Follow Simon on Twitter @sbarnettARK


Last November, a Chinese scientist named He Jiankui violated a global moratorium on germline gene editing when he used CRISPR to alter the genomes of two human embryos. He intended to delete a small region of DNA on a gene called CCR5 that would allow the children to be resistant to HIV. He was unsuccessful in incorporating the exact deletion, called Delta-32, though he did delete significant portions of CCR5 in both girls. This highlights one of the primary concerns with germline editing—the risk of injecting new, and potentially dangerous, genes into our collective gene pool.


A recent, high-impact study demonstrated that individuals with a Delta-32 variant in CCR5 had a 21% increase in all-cause mortality—meaning a 21% reduced likelihood of reaching life expectancy. Although he did not impart the Delta-32 mutation, the deletions in the twins’ genomes are functionally similar to Delta-32, increasing their likelihood of a reduced lifespan.


The study’s authors used a technique called a Phenome-Wide Association Study (PheWAS), searching for all possible disorders correlated to the Delta-32 deletion. This technique is complementary to Genome-Wide Association Studies (GWAS), which instead begin with a specific disease and then search for all possible underlying mutations (as shown below). As gene editing begins to become more commonplace, it will be crucial to execute more PheWAS studies, allowing researchers to be more aware of possible off-target phenotypic effects.



ARK's statements are not an endorsement of any company or a recommendation to buy, sell or hold any security. For a list of all purchases and sales made by ARK for client accounts during the past year that could be considered by the SEC as recommendations, click here. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list. For full disclosures, click here.



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