As we reported earlier, the long-awaited issuance of Gram tokens from Telegram on its Telegram Open Network (TON), was hit with a surprising roadblock when the United States Securities and Exchange Commission (SEC) deemed it unlawful and filed an emergency action as well as a restraining order against it.
Even though the company is not based anywhere in the U.S., the SEC claims that Telegram not only failed to register properly but also was not entirely forthcoming with its investors, most of whom are American. The hearing for the suit by the SEC against Telegram is expected to take place on October 24, at the New York Southern District Court. Regardless, Telegram is reportedly considering its options, the safest of which involves a postponement for about 6 months, or as long as a year.
News from TASS, a Russian source with a main focus on the cryptocurrency market, has it that Telegram could abandon the issuance for now. TASS said:
“According to investors, the possibility of postponing the launch of TON for six months to a year is currently being discussed.”
If this happens, even though Telegram’s hands are considerably tied, its investors could be quite disappointed and this could also put more than a large dent in the company’s plans.
As Coinspeaker recently reported, Telegram’s application to the SEC was filed in February 2018 using a ‘Form D’ which allows the sale of a security under certain conditions. One of the conditions is that the sale is strictly open to pre-accredited investors alone, and this is what Telegram used. However, the major problem here is that Telegram’s plan is to release the tokens to its investors and allow said investors to resell the tokens to the general public. This resale means that the tokens will eventually end up in the hands of parties who have not been accredited.
Hence, the company’s hands are quite tied. If it decides to issue the tokens as planned, it will be directly disregarding the SEC, a move that could eventually cause bigger problems for the company. Another option is to continue the token sale in other more friendly jurisdictions and ignore the U.S. entirely. However, a move like this is much easier said than done, especially because according to the SEC, Telegram sold approximately 2.9 billion Gram tokens to a total of 171 investors, with about 1 billion of these, purchased by investors in the U.S.
The last option is to get right with the SEC and smoothen things out. This would, however, most likely mean that Telegram must pay fines for its error, and would also mean, as TASS has suggested, that issuance would be delayed at least 6 months and probably up to 1 year.
The SEC has warned against flouting laws and would probably not allow Telegram to get off easy.
“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,” said Commission’s Division of Enforcement Co-Director.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.