The US government agency Securities and Exchange Commission (SEC) has publicised its decision to obtain an emergency restraining order against Telegram Group and its wholly-owned subsidiary TON Issuer.
The move stops Telegram from selling or distributing its ‘Gram’ tokens, which raised more than $1.7 billion of investor funds, within the US; the network was set to go live at the end of October.
“Our emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold,” said Stephanie Avakian, co-director, SEC division of enforcement.
“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 sold approximately 2.9 billion digital tokens – titled Grams – at “discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 US purchasers.”
These tokens were set to be delivered upon the launch of its TON blockchain project, however the SEC deemed the fundraising to be illegal in the US as it did not register its offering with the regulator.
“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token,” added Steven Peikin, co-director, SEC division of enforcement.
“Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”
According to Bloomberg, Telegram told investors the company is investigating routes in order to resolve the situation which also included a potentially delaying the issuance of the tokens beyond its October 31.
“We were surprised and disappointed that the SEC chose to file the lawsuit under these circumstances,” the letter added.