- The SEC has informed the founder of Telegram, as well as other employees, that they must make affidavits.
- This was decided by a district court on 25.11.2019 and will thus determine the further course of the proceedings.
On 12 October 2019, the US Securities and Exchange Commission (SEC) issued an emergency lawsuit and interim injunction against Telegram Group Inc. and its subsidiary TON Issuer. Both companies are responsible for Telegram’s initial coin offering. They are accused of conducting an unregistered “digital token offering in the USA and abroad”.
SEC invites Telegram founders and other employees to attend
On 25.11.2019 the District Judge Castel of the New York Southern District Court decided that the founder Pavel Durov as well as other employees have to make affidavits. Ilya Perekopsky, vice president of Telegram, has been summoned for 16.12.2019. Another employee who was familiar with the 1.7 billion USD Gram sale will testify on 10.12.2019.
In detail, the SEC accuses Telegram of selling the GRAM tokens as unregistered securities to audited investors. In order to sell securities in the United States, a detailed application must be filed with the SEC in advance, which will then be reviewed under applicable securities laws.
Only then will approval be granted and the company may sell the securities. Telegram has assumed that the GRAM token will be classified as a capital good and has therefore waived such a request. However, the SEC disagrees.
On 31.10.2019 the start of the Telegram network was postponed to 30.04.2019 due to a preliminary injunction of the SEC. The investors had the choice of a refund of their invested capital or the approval to postpone the launch. The investors agreed to the postponement.
In a further letter from Telegram to the SEC, the company appeals that the accusations presented should be dropped in most respects and the charges should be dropped. The report describes that GRAM tokens were not securities at the time of issuance:
[The SEC’s] claims are without merit as Telegram’s private placement to highly sophisticated, accredited investors was conducted pursuant to valid exemptions to registration under the federal securities laws and Grams will not be securities when they are created at the time of launch of the TON blockchain.
The SEC, in this sign the employee of the SEC Steven Peikin, stressed however several times that Telegram must comply with the disclosure obligations for the protection of the investors and has missed this as far as possible. Peikin stated:
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.
Statements will determine further course of procedure
The results of the case to date are unclear and the ocutcome of the proceedings remains open. Further results are expected for 10.12.2019, when Telegram’s first employee will have to testify in court.
The ICO of Telegram collected already after short time a sum of 1.7 billion USD and belongs thereby to the largest ever accomplished Initial Coin Offerings of history.