We know Securities and Exchange Commission or SEC as an independent agency of the United States federal government. The commission also makes rules for crypto space too. Recently, Securities and Exchange Commission, which holds primary responsibility for enforcing the federal securities laws proposing securities rules and regulating the securities industry, has brought an allegation against Telegram, which is a cloud-based instant messaging and voice over IP service, regarding its yet-to-be launched token which is basically a security.
- Fact is that Telegram has illustrated, mainly regarding fundamentals for example nature of the company and its team and also about its fund raise, all the reasons to the District Court of the Southern District of the New York and told Court to drop the action brought by SEC.
- The agency, SEC, secured an emergency restraining order against Telegram Group and its subsidiary TON Issuer for their $1.7 billion token sale. They terminated Telegram from selling and distributing its gram tokens within the U.S. The allege goes that Telegram sold its 2.9 billion tokens without its offer and sale getting registered. SEC thought the action would prevent Telegram from flooding the U.S. markets with digital tokens which were sold illegally.
- Fact is that though TON blockchain, which get delayed to be issued, has not yet been launched; the gram tokens were sold but yet have not been issued or distributed to issuers. But Telegram said Grams will not be securities as they are generated at the time of launch of the TON Blockchain and the logic of SEC is meritless because the private placement of Telegram to highly complex, accredited investors was directed pursuant to valid exemptions to registration under the federal securities laws.
- Telegram just wants to acquire the advantages of a public offering without maintaining the laws and users cannot avoid the federal securities laws only by labeling their product a cryptocurrency. Telegram wanted to poise allegation over SEC saying it is engaged in improper regulation by enforcement which is failed to provide clear guidance and give notice about violation of federal securities laws. Rather than that SEC has adopted an ad hoc legal position.
But Telegram, which didn’t file a registration statement with the SEC and the news was hide, said that it had engaged with the SEC seeking guidance to avoid breaking federal securities laws of its own accord. They claimed they will constitute a currency or commodity but not security under the federal securities laws. The firm asked the district court to deny the SEC’s claim.