The US Securities and Exchange Commission (SEC) has announced an “emergency restraining order” against Telegram and its cryptocurrency subsidiary TON Issuer for its $1.7 billion token sale.
The SEC says that it has successfully received permission to stop Telegram from selling and, in any other way distributing, its gram tokens within the United States. The network was scheduled to begin on 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. Of this, more than 1 billion grams were sold to investors in the US.
The complaint from the SEC is that Telegram did not pre-register its offer for sale.
In the statement, SEC Division of Enforcement co-director Stephanie Avakian said that this emergency action is “intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold.”
The SEC’s co-director Steven Peikin said: “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.”
Telegram has been working on its TON crypto project for at least a year, mostly in secret, with rumors that Telegram was planing to launch its own token bubbling up as early as January 2018.
In March of 2018, Telegram said that it had raised $1.7 billion in a Form D disclosure that was filed with the SEC.
It was only in the last month that Telegram had begun to publish code relating to the network. Even with that, it wasn’t until very recently that Telegram had publicly said that it was working on TON.