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1. The U.S. Securities and Exchange Commission (SEC) announced that it has filed “emergency actions and obtained temporary restraining orders” against two offshore entities of Telegram’s TON ICO, describing their Grams as “online illegal digital asset securities sales.”
2. According to the US SEC: Telegram has "promised to inject billions of Grams into the US capital market by October 31".
3. Telegram raised $1.7 billion from 171 initial investors around the world using the SAFT protocol and sold 2.9 billion (pieces) of Grams tokens.
4. According to at least one investor in Telegram, the company thinks they can avoid the SEC by "decentralizing."
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Temporary Restraining Order to Stop "ICO"
The U.S. Securities and Exchange Commission (SEC) today announced a lawsuit filing “urgent action and obtaining temporary restraining orders” against two offshore entities behind Telegram’s TON ICO, describing their Grams as “an online illegal sale of digital asset securities.” .
Grams are native Tokens issued on the Telegram blockchain. According to the US SEC, they have no role, and these Tokens are securities subject to the relevant registration requirements of the US Securities Law. This is one of the largest and most coveted token sales of the ICO era.
As part of the lawsuit, the US SEC filed "emergency action and obtained a temporary restraining order" prohibiting it from continuing to provide or sell Grams to anyone. According to the lawsuit, the SEC said Telegram "committed to injecting billions of Grams into the U.S. capital markets by October 31." A hearing will be held on October 24, 2019.
Telegram raised $1.7 billion from 171 initial buyers around the world, with $424.5 million from U.S. investors using a Simple Agreement for Future Tokens (SAFT). Telegram previously sold 2.9 billion Grams at a discount to 171 buyers around the world, including 1 billion tokens sold to 39 U.S. investors.
They allegedly used the funds to "capitalize their business and fund the creation of their blockchain, the 'TON Blockchain'."
However, the US SEC stated that the issuance and sale of the token violated the registration requirements of the Securities Act of 1933 (Securities Act of 1933). Interest is repaid, and a penalty is imposed.
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Why is the US SEC upset?
The Grams tokens seen by the U.S. SEC are themselves securities, and Telegram has committed to a massive sale by October 31 and hopes to sell more in the meantime.
Stephanie Avakian, co-director of the SEC's enforcement division, said the urgent action was to prevent Telegram from flooding the U.S. market with a flood of digital tokens that the SEC said were being sold illegally.
The SEC alleges that the defendants failed to provide investors with information about Grams and Telegram's business operations, financial condition, risk factors, and management as required by securities laws. The SEC said it has repeatedly reminded issuers that they cannot circumvent federal securities laws simply by labeling their offerings as cryptocurrencies or digital tokens. And Telegram sought to reap the benefits of a public offering without complying with long-standing disclosure responsibilities designed to protect the investing public.
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Why file a lawsuit in U.S. federal court?
The lawsuit was filed in U.S. federal court, not an administrative proceeding with the SEC. This may be due to Telegram's refusal to accept a subpoena from the Securities and Exchange Commission. If so, it would be no surprise that the US SEC went to US federal court to seek emergency action and obtain a temporary restraining order.
According to at least one Telegram investor, the company thought they could sidestep the SEC by making the company more “decentralized.” But as this lawsuit and the emergency restraining order show, that's not the case.
This is demonstrated in lawsuits brought in federal court, because federal judges have more direct raw power than administrative law judges, and can also issue rulings that set precedents for other cases.
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TON, which is expected to be launched in late October, ushered in a blow
In addition to Libra, the most anticipated blockchain project in the market in 2019 is TON.
Before the U.S. SEC issued a restriction order, TON was advancing very quickly, and it was a star project that was expected to be launched before Libra.
Previously, the launch of the Telegram Open Network (TON) was on schedule, according to an email sent by the development team to TON investors. According to Mitja Goroshevsky, CTO of TON Labs, the project is scheduled to launch by October 31 under existing agreements with TON investors.
Telegram has developed a wallet for the cryptocurrency Gram. This wallet is available in Telegram messenger iOS alpha version and TON testnet. According to the developers, the design of the wallet is still in progress and when everything is done, the wallet will also be available on the mainnet. Additionally, on Oct. 8, Telegram published the terms of use for Grams Wallet, a wallet designed for its cryptocurrency Gram (GRM). This wallet is provided by London-based Telegram FZ-LLC, one of Telegram’s registered messaging service entities and the official publisher of the Android Telegram app.
In addition, the market is generally optimistic about the development potential of TON.
The Telegram Open Network (TON) is expected to be worth more than $20 billion within five years, according to a new study by New York-based blockchain venture capital and digital asset fund Decentral Park Capital. The research points to the great potential of TON, emphasizing that it can be used as a gateway to crypto assets and related applications, "banking the unbanked and becoming the first discovery platform for Web 3.0 applications, similar to Web 2.0's App Store."
However, now that the U.S. SEC’s restriction order has given Telegram a head-on blow, other regulators may also follow the U.S. SEC’s steps to propose relevant bans.
Previously, after contacting more than a dozen regulators and central banks regarding Telegram's blockchain project Telegram Open Network (TON), decrypt learned that responses from regulators ranged from "no comment" to "nothing to say." ". A spokesman for the German central bank said: “We do not have any specific information about TON. We are therefore unable to comment on the application. A spokesperson for the Office of the Privacy Commissioner of Canada added: “Given that we have not had the opportunity to delve into the technology, We are unable to comment. A spokesperson for the European Central Bank said: "This appears to be another crypto experiment and is not really a problem for regulators/supervisors at this stage. A spokesman for Europe's data protection chief said: "There really isn't much information.
For a while, Telegram, which was in full swing, fell into dire straits.
In addition, Libra is also constantly fighting. On October 11, payment giants Mastercard, Visa, eBay, Stripe and Mercado Pago announced their withdrawal from the Facebook Libra project.
Regulatory suppression on the one hand, and the departure of founding members on the other, Libra is also struggling in the cracks.
