Published: Sun, October 13, 2019
Markets | By Otis Pena

SEC blocks Telegram's $1.7 billion cryptocurrency plans in the US

SEC blocks Telegram's $1.7 billion cryptocurrency plans in the US

Defendants sold approximately 2.9 billion digital tokens called "Grams" at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 USA purchasers.

The SEC alleged that Telegram and its subsidiary had started raising investors funds since January 2018 by selling unregistered securities in the USA and overseas to fund the development of its blockchain, and the message platform Telegram Messenger.

"Our emergency action today is meant to prevent Telegram from flooding the USA markets with digital tokens that we allege were unlawfully sold", said the regulator.

Telegram allegedly failed to provide its token sale investors with information regarding the offering and the company's business operations, Avakian noted. The SEC has officially ordered Telegram to ground the initial coin offering (ICO) of its highly anticipated blockchain project, Telegram Open Network (TON).

The case file says that these companies began to raise capital in January 2018. The commission said on its October 11 blog report that the messaging service company has already raised more than $1.7 billion of investor funds in the US and overseas.

Although the Gram token has not yet gone live, a secondary market for the digital asset has emerged, with small exchanges and OTC trading desks promising to sell the tokens once they're available.

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The SEC said in a complaint filed in US District Court in NY that Telegram had planned for the Grams to be delivered to consumers by the end of October.

Telegram sold 2.9 billion gram tokens "at discounted prices to 171 initial purchasers worldwide", the press release from the SEC said.

"We have repeatedly stated that issuers can not avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token", writes Steven Peikin, fellow co-director of the SEC's Division of Enforcement, in a statement.

Coinfomania: Where blockchain and cryptos live. The SEC states that Telegram is in violation of registration requirements of the federal securities law.

The lawsuit was filed in Manhattan court.

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