The United States (“US”) Securities and Exchange Commission (“SEC”) on October 11, 2019, had stated in its complaint that it shall be obtaining a temporary restraining order against Telegram Open Network Issuer Inc. (“TON Inc.”), a wholly-owned subsidiary company of Telegram Group Inc. (“Telegram”). The emergency action and temporary restraining order against Telegram were in regard to an allegedly unregistered digital token offering in the US and overseas, through which Telegram had raised app. USD 1.7 billion from January 2018 to March 2018 from sales of app. 2.9 billion digital tokens to 171 (one hundred and seventy-one) purchasers. In the US markets itself, Telegram had raised almost USD 424 million from 39 (thirty-nine) purchasers.
It was the opinion of the SEC that the digital tokens named “Grams” violated the registration requirements of the Securities Act of 1933. The purpose of Grams was to capitalize on the proceedings to finance the TON blockchain, which Telegram is building. The US SEC in its complaint also specified as to how Grams qualify to be only “securities” and not “currencies”. This is so because the initial purchasers and subsequent investors expect to profit from Grams and there exist no products or services that can be purchased through Grams (this is also an essential differentiating factor to adjudge the qualification of a token to be a “security”). Telegram had plans to sell more Grams to investors to accumulate capital, however, as of October 11, 2019 telegram had not filed any registration statement with the SEC, violating section 5 of the Securities Act which state that securities shall be unlawful unless they are is a registration statement in effect and further that no person without a registration statement shall involve in any means of communication with regards to the offer to sell or offer to buy of such securities.
Recently, in the final judgment in the SEC case, on June 25, 2020, in SEC v. Telegram Group Inc. and TON Group Inc., Telegram has agreed to pay back 70% (seventy percent) of the USD 1.7 billion to all investors and also a USD 18.5 million fine. The final judgment also stated that the defendants, Telegram, are liable for USD 1,224,000,000 disgorgement. The court ordered Telegram and subsequent issuers to notify the SEC, 45 (forty-five) days in advance before participating in any issuance of cryptocurrencies or digital/security tokens. The SEC order is the biggest backlash around a cryptocurrency case in the US.
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