The upcoming Telegram token issue has been eagerly awaited for some time. However, a legal move by the US Securities and Exchange Commission (SEC) has now put it on hold.
What Has Happened?
The SEC raised an emergency action against Telegram. This allowed them to get a temporary restraining order on the messaging firm’s ICO.
It seems that the ICO has raised an incredible $1.7 billion in terms of funds from investors. The SEC claim that the token offering isn’t valid, as it was unregistered.
The complaint that has been registered state that the Telegram Group Inc. and TON Issuer Inc. started to raise funds in January 2018. This was to raise funds to develop their Telegram Open Network (TON) blockchain, among other things.
The firm’s ambitious plans included allowing blockchain payments on their messaging app. The ICO is said to have sold 2.9 billion Gram tokens around the world. Their app currently has around 300 million users.
The SEC complaint points out that Telegram promises to deliver those token by no later than the end of October of this year. At this point, Telegram can sell billion of Gram tokens. The reference price of $3.62 is a lot higher than the price the tokens were sold at in the ICO.
However, they didn’t register the Telegram token issue in terms of the offer or the sales. According to the SEC, they are securities and this move violated the Securities Act of 1933.
What Are the SEC Saying?
Stephanie Avakian is the Co-Director of the SEC’s Division of Enforcement. She said that their emergency action is designed to stop Telegram from “flooding the US markets with digital tokens that we allege were unlawfully sold.”
She went on to state that Telegram “failed to provide investors with information regarding Grams and Telegram’s business operations”, as well as other important information. Securities law require that potential investors are fully informed on areas such as risk factors and management.
Steven Peikin is also a Co-Director at the SEC. He has said that the messaging company wants to “obtain the benefits of a public offering without complying with the long-established disclosure responsibilities”.
An earlier example of an unregistered ICO saw Block.one reach a civil settlement with the SEC. They agreed to pay a £24 million fine but refused to admit to the SEC’s allegation of improper conduct.
What Happens Next to the Telegram Token Issue?
Telegram management is reportedly looking at ways to address this complaint. This could mean the tokens being issued later than the 31st October deadline that they have been working towards.