The team behind the popular messaging platform Telegram, has been developing a blockchain named “TON” since 2017 with its native cryptocurrency Grams (GRM). The purpose of the project is to complement traditional currencies by improving speed, efficiency and security.
In 2018, Telegram raised $1.7 billion by selling approximately $2.9 billion GRMs to 171 accredited investors, 31 of which were based in the United States of America. As a proportion of the users who bought GRMs were based in the United States, the SEC intervened as Telegram had to register GRM tokens as securities
Telegram initially tried to circumvent the SEC’s requirement for registration and initially thought was successful at doing so. Unfortunately, a few days before the mainnet was meant to launch in October 2019, the SEC hit back with a restraining order that forced Telegram to stop the project in its tracks. Telegram’s initial judgement was that since these tokens were only sold to accredited investors, the registration process was not necessary. The SEC thinks otherwise and asked for Telegram’s bank records where they might believe misconduct can be found.
The district court of the southern district of New York gave Telegram until February 26 to hand over the documents. The lawyers of Telegram’s CEO, Pavel Durov, responded that these will be handed over by January 15 at the latest.
According to the SEC, Telegram was funded by Mr. Durov himself in the beginning stages and that the $1.7 billion raised by the sale of GRM tokens were needed to buy servers.
Although Telegram has reiterated multiple times that “Grams will not entitle purchasers to any income, any dividends, or any interests in Telegram … nor do they resemble stock or any other form of equity”, the SEC said that the Telegram employees considered GRMs as securities and employed traditional capital market vocabulary to pitch the ICO.
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