SEC Issues Emergency Action, Halting ‘Gram’ Issuance

Telegram Unregistered Digital Token Offering

The SEC has just announced their filing of an emergency action for a restraining order against Telegram and its subsidiary, TON. This filing was completed due to, what the SEC perceives as, an illegal securities offering, in the form of an ‘ICO’.

Where the issue arises is the lack of disclosure to the SEC on behalf of Telegram. Not only does the SEC view these tokens sold in the ICO as securities, but the sale was not registered by Telegram.

The SEC is taking action now, as the tokens are soon scheduled for distribution among investors.

The ICO in Question

This entire situation stems from an ICO which opened in 2018. This capital generation has resulted in over $1.7B being raised through the sale of 2.9B tokens known as ‘Grams’.

Of the investors that purchased tokens, 39 reside within U.S. borders – resulting in the sale falling under the purview of the SEC.

Commentary

Upon releasing their emergency action for a restraining order, multiple representatives handling the case from the SEC took the time to elaborate on the decision. The following is what they had to say on the matter of Telegram and TON.

Steven Peikin, Co-Director of Enforcement at the SEC, stated,

“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token…Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

Stephanie Avakian, Co-Director of Enforcement at the SEC, stated,

“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold…We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”

Telegram

A popular messaging app, Telegram is a German based company which was founded in 2013. The service functions as a direct competitor to Discord, WhatsApp, and others.

CEO, Pavel Durov, currently oversees company operations.

SEC

The Securities and Exchange Commission (SEC), is a U.S. based regulatory body. This government sanctioned entity is tasked with protecting investors, by ensuring fair and transparent markets through the enforcement of securities regulations.

Chairman, Jay Clayton, currently oversees operations at the SEC.

In Other News

With the SEC continuing their crackdown on regulation violations, we thought the time was right to shed some light on the distinction between utility and security tokens. Constantin Kogan, Venture Partner at BitBull Capital, and CBO at ABOTMI, took the time to pen his thoughts on the topic, sharing them in our ‘Thought Leader’ series.

The Howey Test: The Fine Line between a Security Token and Utility Token