The United States Securities and Exchange Commission (SEC) revealed in an announcement today that it has filed an emergency action as well as obtained a temporary restraining order against Telegram Group Inc. and its wholly-owned subsidiary, TON Issuer Inc.
The SEC as in most previous cases against crypto projects alleged that the 2.9 billion Gram tokens which Telegram sold to raise $1.7 billion from investors both in the U.S and overseas are securities. Such a status simply means that the startup fell short of the U.S securities law, which requires that such token offerings are registered with the SEC.
In today's announcement, the SEC said that Telegram had started its fundraising effort in January 2018 with the objective of using the raised capital to develop its own blockchain, the “Telegram Open Network” or “TON Blockchain,” as well as the mobile messaging application Telegram Messenger.
However, with Telegram set to release Gram tokens to investors before October 31 finally, the SEC said its latest move was to prevent the unregistered securities from flooding the U.S market.
Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement said in the release,
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.
The SEC’s complaint notably seeks certain emergency relief, as well as permanent injunctions, disgorgement with prejudgment interest, and civil penalties against Telegram.
Meanwhile, the latest enforcement action adds Telegram to the regulator's growing list of crypto projects to the violated securities registration requirement. The last victim as we reported was EOS.IO developer Block.one who paid $24 million to settle charges with the SEC over its initial coin offering (ICO) conducted in 2017.