The High Court has given a green light to Capital Markets Authority (CMA) to proceed with its investigations and inquiry into the operations of Kenicoin cryptocurrency.
The Authority in 2019 issued a cautionary note when Wiseman Talent Ventures, the owners of Kenicoin, begun selling this cryptocurrency to the public, at the price of KSh 100 apiece and guaranteed investors returns of 10 per cent monthly.
After an aggressive public awareness campaign by CMA, Safaricom shut down its pay bill till No that was to be used by speculators and investors of Kenicoin, effectively bringing this cryptocurrency to a screeching halt.
Court dispute
At this point, Wiseman Talent Ventures approached the court and filed a suit as the plaintiff and against CMA. This was in a civil suit No. 8 of 2019 filed at the Milimani High Court-Commercial and Tax Division.
In an affidavit dated January 14th, 2019, the Wiseman Talent Ventures firm sought to have CMA stopped from interfering with the trading and offering of Kenicoin.
It argued CMA is not mandated to deal with cryptocurrency under the law. The firm added that negative media statements, run in the media by CMA, had caused panic to its customers. It said Safaricom, which was running a pay bill number for Kenicoin, also shut down the till to its customers.
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CMA RESPONSE
In a response to this affidavit, dated 28th June, 2019, CMA accused Wiseman Talent Ventures of unlawfully engaging in the business of cryptocurrency, issuing cryptocurrency to the public and trading with Kenicoin.
The Authority said Wiseman Talent Ventures is registered to conduct the business of Talent Mentorship Program and had hence approached the court with dirty hands and should not be granted the orders sought.
The Authority also said its actions in placing precautionary statements in the media was to warn the investing public against information asymmetry, contradictions and misrepresentations in Kenicoin’s documents posted on the firm’s website.
Mr. Haron Kiriba, the sole proprietor of Kenicoin, said in the suit papers that Kenicoin was trading online. “In the initial coin offering tokens/coins are sold to the speculators/investors in exchange for legal tender or other cryptocurrencies such as Bitcoin and Ethereum. The business will eventually have a public ICO,” said Kiriba.
The regulator said that in the interim, pending publication of an appropriate framework for the regulation of Initial Coin Offer (ICO), it would be a failure on its part to observe while the investing public was at risk of significant loss without the Authority taking any appropriate measures.
CMA has argued that the nature and features of Kenicoin’s capital raising activities were taking the form of Capital Markets, which had not been approved.
COURT RULING
Judge M.W Mwangi, in a ruling dated 27th September, 2019, the court ruled that CMA can proceed with investigations/inquiry on operations of Kenicoin. This is pending the legislative process on publication of appropriate framework for the regulation of initial coin offering (ICO).
In his ruling, Judge Mwangi said Wiseman Talent Ventures failed to establish a prima facie case, the damage, injury, loss of damage occasioned by CMA’s temporary injunction against the firm, will not be adequately compensated by damages.
The court ruled in favour of consumer protection through inquiry, investigation and regulation of Kenicoin cryptocurrency as a security under CMA whose mandate is to regulate Capital markets and securities.
Global trends in unregulated digital currencies demonstrate that the crypto asset market is uncertain and has experienced accelerated boom and bust cycles which may expose investors to substantial losses.
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