The United States Securities and Exchange Commission announced Friday that it has obtained a temporary restraining order against Telegram Group and its subsidiary TON Issuer. In a press release, the SEC said that the complaint alleges that Telegram and TON Issuer have been conducting an ongoing, unregistered digital token offering in violation of Securities Act registration provisions.
The SEC’s complaint alleges that Telegram’s effort to raise capital through the sale of its digital Gram tokens began in January 2018. Telegram and TON Issuer eventually sold about 2.9 billion Grams, I billion of which were purchased by U.S. investors, raising $1.7 billion. Those investors were promised delivery of their Grams by October 31,2019.
According to the SEC, those Grams are securities which should have been registered prior to the sale offering. SEC Division of Enforcement Co-Director Stephanie Avakian explained why the SEC took this action now:
“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold. 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.”
Division of Enforcement Co-Director Steven Peikin reaffirmed the SEC’s previously-stated position that “issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token.”