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U.S. SEC Holds Telegram’s $1.7 Billion funding Unlawful

The U.S. SEC has filed an interim restraining action against Telegram’s ongoing GRM token issuance in the U.S. and overseas. The Securities and Exchange Commission considers the process of token offering is illegitimate. The announcement has published on the regulator’s website on Oct 11. 

The notice displayed an emergency action is taken against the two offshore companies i.e. Telegram Group Inc. and its subsidiary TON, which have raised until now over $1.7 billion of investor funds, by selling an alleged unregistered GRM token offering.

The issuance of Grams (GRM) token was started during Jan 2018, to fund the development of Telegram messenger app and its TON blockchain. It is estimated that 2.9 billion GRM tokens were sold to 131 initial investors at a discounted price worldwide and over 1 billion tokens to 39 U.S. consumers. 

The investigation process is still going on against both the defendants by the SEC’s Cyber Unit administrators, among them are Daphna A. Waxman, Morgan B. Ward Doran, and John O. Enright. The complaint is registered in Manhattan’s federal district court. 

The accusation of U.S. SEC comprises of  “violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and seeks certain emergency relief, as well as permanent injunctions, disgorgement with prejudgment interest, and civil penalties.”

Furthermore, the case is supervised by SEC’s Cyber Unit acting Chief, Carolyn Welshhans, and Lara Shalov Mehraban, the New York’s Regional Office Associate Regional Director. Jorge G. Tenreiro and Kevin McGrath would look after the SEC’s litigation.

TON Blockchain Launch & U.S. SEC Allegation

Telegram’s TON blockchain was supposed to launch on OCT 31. However, the plans are halted by the authorities and probably the cryptocurrency lovers have to wait for some more time to enjoy the investing benefits. 

The information reveals that the defendants have avoided the federal securities laws “to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933.”

Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement considers the issuance of GRM tokens as “Unlawful” and mentioned that the accusers have not disclosed the information concerning “Grams and Telegram’s business operations, financial condition, risk factors, and management” which is required by the federal securities laws. 

Displayed on the website of U.S. Securities and Exchange Commission

Reportedly, it is cleared that Telegram submitted “Form D” filing without registering it with the SEC in Feb 2018, which worked when an organization takes the benefit of using one of two exemptions. In telegram’s case, the establishment took the aid of 506(b) exemption. This exemption says that neither the company can advertise the securities nor it can sell its securities more than 35 non-accredited investors. Meaning only accredited “sophisticated” investors can purchase its securities.

However, Telegram has failed to perform its actions. The benefits of obtaining funds through public offering without fulfillment of the long-established regulatory affairs are considered unethical and illegal practices. Said Steven Peikin, another Co-Director of the SEC’s Division of Enforcement.

SEC’s recent move of stopping Telegram from distributing and selling its Gram tokens in the U.S. comes after the Block.one case. Where SEC has secured  $24 million penalties against the unregistered initial coin offering (ICO) which is EOS security. 

Image by Gerd Altmann from Pixabay

Tags: Cryptocurrency regulation, Bitcoin Regulations News, Telegram, TON Network, GRAM (GRM) Token, U.S., SEC, Law, Government, Block.one, ICO, Securities