SEC puts a stop to Telegram's cryptocurrency plans in the US
Telegram's plans for its cryptocurrency and blockchain network may be in jeopardy. The US Securities and Exchange Commission has filed an emergency action and obtained a temporary restraining order against the company, which prevents it from distributing and selling its Gram tokens in the country. According to the regulators, the company sold 2.9 billion Grams at discounted prices to 171 initial purchasers worldwide, raising $1.7 billion in the process. A billion of those tokens were purchased by people in the US.
The agency says Telegram didn't register the offering with its office, and since it sees Grams as securities, it's accusing the company of violating the Securities Act of 1933. It's not clear how this restraining order would affect Gram's launch as a whole. Former SEC attorney Zachary Fallon told Bloomberg that it could also complicate the company's ability to sell tokens in other countries. But even if it doesn't prevent Telegram from launching outside the US, it could still cause huge issues for the company. The New York Timesreported back in August that Telegram promised investors it would deliver Grams by October 31st or return their money.
The SEC Division of Enforcement's Co-Director Stephanie Avakian said:
"Our emergency action today is intended to prevent Telegram from flooding the US 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 agency also stressed that companies can't avoid federal securities laws just by labeling their products a cryptocurrency or a digital token.