SEC Issues Cease & Desist Order For TON Sales By Messaging App Telegram Operator Oct 13, 2019 Oct 13, 2019 Kelly Cromley http://1AZFjzw2#Nwf63pYaMWq#xIY
Market NewsOctober 13, 2019 by Kelly Cromley

SEC Issues Cease & Desist Order For TON Sales By Messaging App Telegram Operator

The US Securities and Exchange Commission (SEC) has officially ordered Telegram Group, which operates Telegram encrypted messaging facility, to immediately end sales of its cryptocurrency Gram.

The SEC has stated that Telegram and its cryptocurrency subsidiary TON Issuer Inc., refrained from registering pre-sale of $1.70 billion of its crypto tokens before the October 31st launch of its blockchain network.

As the SEC considers cryptocurrency as securities, the agency states that Telegram is in breach of the Securities Act.

Stephanie Avakian, the co-director of the SEC’s Division of Enforcement, detailed the intention behind the ban:

“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.”

Notably, as per agreed conditions, if Telegram does not disburse the initial batch of tokens by October 31st, it is bound to give back the amount raised. As per the SEC, 171 individuals and organizations invested in Gram and purchased 2.9 million tokens.

One million of those tokens were purchased by 39 US investors. However, Telegram never registered their sale with the SEC. So, according to the SEC, Telegram has to forfeit the $1.70 billion amassed through funding process.

Telegram has not been transparent with its transaction related to TON network. The blockchain platform is structured to be offered in combo with a digital wallet, similar to Facebook’s intention to launch decentralized stable coin through its Libra endeavor.

Telegram acknowledged the network’s existence only this month in a letter to investors, while revealing the official launch date. The pre-sale of its tokens, which resulted in raising $1.70 billion, alerted regulators and security specialists who were worried that the lack of regulatory oversight would turn Telegram’s network attractive to drug dealers and money launderers.

Steven Peikin, fellow co-director of the SEC’s Division of Enforcement, explained the reason for halting the sales of cryptocurrency Gram.

“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.”

The SEC filed a case in Manhattan’s federal district court. The case charges TON issuer and Telegram with violation of two compulsory registrations as per the Securities Act. In this regard, the agency seeks “certain emergency relief, as well as permanent injunctions, disgorgement with prejudgment interest, and civil penalties.”

AuthorKelly Cromley

Kelly is our in house crytpto researcher, delving into the stories which matter from blockchains being used in the real world to new ico coming out.