SEC Obtains Emergency Order to ‘Halt’ Telegram (TON) Token’s Progress

The order, which is still hot off the presses at the time of writing, can be found on the SEC’s website here: https://www.sec.gov/news/press-release/2019-212

Released today (October 11th, 2019), the order starts off by stating:

“The Securities and Exchange Commission today announced that it has filed an emergency action and obtained temporary restraining order against two offshore entities conducting an alleged unreigstered, ongoing digital token offering in the U.S. and overseas that has raised more than $1.7 billion of investor funds.”

Details of the Complaint:

  • Telegram Group Inc., and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 for ‘Telegram Open Network’ / ‘TON Blockchain’
  • Curiously, the SEC states that this funding was also done for the “mobile messaging application Telegram Messenger”
  • 2.9 billion $TON tokens (Grams) were sold to 171 initial purchasers worldwide, “including more than 1 billion Grams to 39 U.S. purchasers.”
  • It was promised to all purchasers that the ‘Grams’ they had purchased would be delivered by, “No later than October 31, 2019”
  • Immediately after delivery of said ‘Grams’, purchasers would be able to freely sell these tokens on the open market in the U.S. and elsewhere (press release specifically notes ‘U.S. markets’)
  • “The complaint alleges that defendants failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933”
  • The SEC alleges that the digital tokens were “unlawfully sold” and states that the defendants (Telegram) failed to provide investors with, “information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”
  • The SEC’s complaint was filed in federal district court in Manhattan (New York) and it charges both defendants (Gram and Telegram; essentially, Telegram) with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act, and “seeks emergency relief, as well as permanent injunctions, disgorgement with prejudgment interest, and civil penalties.” [that’s steep as fuck]

Below is the text of Section 5(a) and 5(c) of the Securities Act that is referred to above:

http://www.columbia.edu/~hcs14/S5.htm

The actual pdf of the report itself can be found here:

https://www.sec.gov/litigation/complaints/2019/comp-pr2019-212.pdf