SEC announces "emergency" halt of Telegram’s Gram cryptocurrency sale

Andrew Cummings
October 13, 2019

Following on its widely reported denial of the latest bitcoin ETF proposals, the SEC filed an emergency action and temporary restraining order against messaging giant Telegram's distribution of its token to USA customers.

The SEC revealed on October 11 that it had applied for and was granted an emergency action and restraining order suspending Telegram's management from selling or distributing its Gram tokens in the US.

The SEC alleges Telegram and subsidiary TON started raising funds to develop the TON Blockchain or Telegram Open Network, as well as the Telegram Messenger app, back in January 2018.

"Our urgent actions today are created to prevent Telegram from flooding the American markets with tokens, which we assume were sold illegally", the SEC spokeswoman Stefani Avakian said in a statement.

The company, whose encrypted messaging program Messenger has some 300 million monthly users worldwide, raised more than $1.7 billion in funds from United States and overseas investors. Rumors of the company's initial coin offering (ICO) began circulating in early 2018.

The biggest concern for the SEC, at this point, is that GRAM tokens will be sent to respective investors before October 31, 2019.

Telegram sold 2.9 billion gram tokens "at discounted prices to 171 initial purchasers worldwide", the press release from the SEC said. "Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities created to protect the investing public".

The SEC's co-director Steven Peikin said: "We have repeatedly stated that issuers can not avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token".

The US Securities and Exchange Commission has formally instructed Telegram Group, the parent company of the Telegram encrypted messaging service, to halt sales of its cryptocurrency Gram. The complaint charged both Telegram and TON with violating the registration provisions of Sections 5 (a) and 5 (c) of the Securities Act while seeking certain emergency relief, permanent injunctions, disgorgement with prejudgment interest and civil penalties.

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