Telegram issues a formal response to accusations it violated US securities laws

Telegram issues formal response to accusations it violated US securities laws

Getting your Trinity Audio player ready...

Telegram was recently ordered to bring to a halt its activity surrounding the TON (Telegram Open Network) and associated Gram cryptocurrency. The U.S. Securities and Exchange Commission (SEC) asserted that the solution violated its rules and has decided to go after the organization through legal channels. This has led Telegram to suggest it might keep investment money it has already received, which ruffled a few feathers, but the entity has now provided another update to the story and submitted an official response to the SEC.

Telegram asserted that the Gram is not a security, according to court documents. On the other hand, it recognized that the purchase agreements signed by investors and the organization could be considered securities. It pointed out, however, that the tokens were offered through a “simple agreement for future tokens” (SAFT) agreement subject to certain legal exemptions. Telegram added that the Grams are exactly the same as what was presented with both BTC and Ethereum, which were already determined to be commodities by regulators.

Telegram has asserted that the SEC response to the Gram was nothing more than a misguided witch hunt, adding that it regularly communicated its efforts with the commission during the entire process of the offering. It asserted that the SEC was trying to gain a “strategic litigation advantage” by issuing its complaint against the company in light of the pending lawsuit.

Calling something a commodity and not a security was not the same as it actually being a commodity and not a security. A former lawyer with the SEC, Philip Moustakis, was the first attorney to fight a Bitcoin-related company on behalf of the commission and explained, “In its complaint against Telegram, the SEC alleged there was no separation between the Gram offering and the Gram token. Rather, the SEC alleged, the offering was a traditional capital raise because, among other things, the company used funds raised for operations and to build out its network, there were no goods or services for which one might use the Gram, and Gram purchasers had a reasonable expectation of sharing in the company’s profits should it succeed in building out the functionalities it promised.”

If Telegram were found to be in violation of the SEC’s rules by a court judge, it could be looking at a couple of civil penalties. One would be a disgorgement, which would require Telegram to relinquish any “ill-gotten” gains, and the other was rescission, which would force the company to buy back any tokens purchased by investors in order to recuperate their losses.

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.