When Cryptocurrencies and Insurance Policies Collide: The D&O Securities Exclusion in the Blockchain Age

  • June 30, 2022
  • Nabil Mahmood

During the fall of 2020, when Ontarians were hunkering down for the second COVID-19 pandemic wave, the Ontario Superior Court of Justice released its decision in Kik Interactive Inc. v. AIG Insurance Company of Canada[1]. The Court was tasked with interpreting whether the respondent insurer’s securities exclusion worked to preclude coverage for cryptocurrency sales to the public.


Kik Interactive Inc. (“Kik”) is a Kitchener-Waterloo, Ontario based information technology company famous for developing the instant messaging app named “Kik Messenger”. During the late 2010s, as with many other information technology companies, Kik took steps to enter the world of cryptocurrency. Cryptocurrencies are digital currencies designed to function as a medium of exchange independent of government or central bank authority.

Kik developed the blockchain-based cryptocurrency called ‘Kin’, and in 2017, sold the currency to accredited investors using a common investment contract offered by cryptocurrency developers called Simple Agreement for Future Tokens (“SAFT”). SAFT requires investors to pay money to the developer for the right to cryptocurrency tokens upon the completion of the product. Following the initial phase where Kin was sold using SAFT to accredited investors, Kik moved to a second phase where they intended to offer Kin for sale to the public.

Kik met with the Ontario Securities Commission which advised that it would consider the sale of Kin to the public to be a public offering of securities. As a result, Kik decided to prohibit Canadian residents from purchasing Kin, but otherwise proceeded with the public sale. Kik’s position was that Kin was not an investment contract or security, and therefore did not register the sale with the Securities and Exchange Commission (the “SEC”), the American regulator.