SEC says new evidence damages Telegram’s chances of refuting lawsuit

Getting your Trinity Audio player ready...

The U.S. Securities and Exchange Commission (SEC) is digging deeper, hoping that new evidence it submitted will help build its case against Telegram for offering illegal securities to investors. The two continue their drawn-out battle over whether or not the sale of Gram tokens to support the development of the Telegram Open Network (TON) ran afoul of securities laws, with still no clear result emerging in the dispute. Telegram is expected to respond to the lawsuit in court by next Monday.

According to Finance Magnates, the SEC has turned over documents from several sources, all of which are designed to support its lawsuit. Some of these files come from the Monetary Authority of Singapore and are tied to the Liquid exchange, while other files presented are tied to Space Investments. Additionally, the Bittrex and Poloniex exchanges have also supplied documents; however, the SEC has not specified how any of the aforementioned data helps it build its case.

As the drama continues, the SEC has tried to assert that Telegram has not spent any of the investment funds on blockchain development, a claim the global messaging company adamantly denied. The financial regulator even tried to defend its argument by relying on a supposed expert, Professor Maurice Herlihy of Carnegie Mellon University, but TON supporters have called him out for making illegitimate claims. The newly-formed TON Community Foundation, comprised of blockchain developers, computer scientists and others, filed an amicus brief with the court, arguing that the lawsuit should be rejected based on the SEC’s “innovation-suffocating regime.” It added, contrary to Herlihy’s claims, that the blockchain code behind TON is fully operational, and that the professor’s idea that a blockchain is designed primarily “to manage a cryptocurrency or coin” shows his lack of expertise on the subject.

In an effort to make, or break, the case, the Commodity Futures Trading Commission (CFTC), which has often taken a lighter touch to the crypto space, was invited to provide input on the dispute. However, its response, submitted yesterday, did little to clear the air. In a letter to the court, the CFTC states that “digital currency is a commodity,” but adds that the Commodity Exchange Act “provides that many securities are commodities to which the securities laws apply. Thus, any given digital asset may or may not be subject to the securities laws, but that does not depend on whether the asset is a commodity. It depends on whether the asset is a ‘security’ within the meaning of the ’33 Act itself,” according to Finance Feeds.

It would seem that, still, no one is able to come up with irrefutable evidence to support the SEC’s claims. Instead, as many have pointed out, this seems to be more of a witch hunt, with the financial regulator consistently showing that it wants to suppress innovation.