An emergency action has been taken by the U.S. Securities and Exchange Commission (SEC) against Telegram in a bid to temporarily restrain the company alongside its subsidiary, the Telegram Open Network (TON), from going forward with its token sale.
The SEC obtained an immediate restraining order against the two companies because it got wind of their token sale, which took place in January 2018, an event the SEC considers illegal because it was not registered with them.
The order reads:
“Defendants sold approximately 2.9 billion digital tokens called ‘Grams’ at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers.”
Telegram, which is yet to fulfill its part of the deal by making delivery of the Grams to those who have already paid for it, has been working round the clock to do as promised. The company promised to make the Grams available on or before October 31, 2019, following the launch of its blockchain. The plan is for Telegram and the investors to commence sales of Grams in their billions into U.S. markets once this happens.
The SEC Says a Big No
The SEC has, however, categorically made it clear that nothing of the sort would be happening. Mentioned in the agency’s complaint is an alleged failure by Telegram to register the offers and sales of Grams, an asset that is considered a security. This is clearly a violation in the sight of the SEC as it goes contrary to “the registration provisions of the Securities Act of 1933.”
Stephanie Avakian, the Co-director of the SEC’s Division of Enforcement, admitted that the action is aimed at stopping any distribution of tokens to the U.S. citizens that participated in the token sale event.
Avakian maintains that the token sale was illegal because no authorization was obtained first and also that investors were not adequately briefed by Telegram about its financial condition, business operations, risk factors, etc., regarding the Grams and its entire operation.
Telegram Watches with a Deafening Silence
Telegram has not said anything so far to agree to or deny the accusations from the SEC.
Recently, the SEC went after Block.one, makers of the EOS cryptocurrency, and slammed it with a fine of $24 million for conducting an unapproved token sale
Block.one seems okay with the fine because it agreed to settle, only that it will not admit to crossing any line.