An urge came from U.S. federal judge, Peter Kevin Castel who is a Senior United States District Judge of the United States District Court for the Southern District of New York, to the SEC and Telegram, a cloud-based instant messaging and voice over IP service, to consider the economic realities of the $1.7 billion token sale and the SEC shouldn’t get hung up on ‘’labels’’ in determining whether Telegram, which ensures clients apps are available for Android, iOs, Windows Phone, Windows NT, macOS and Linux, conducted a illegitimate securities offering.
The judge wanted to know about the Telegram’s economic justification for locking up the first round of purchase agreements and what’s will be happened at the launch of TON blockchain. But reportedly it has been assured to the Judge that there was sufficient interest in the blockchain from the decentralized community. The allegation of Securities and Exchange Commission over Telegram about how the company’s sales to accredited investors were not done as per Reg D standards. But according to Telegram, it was a legal violation.
The company said the two token sales to private investors should be viewed as a public offering, saying the company didn’t strictly restrict initial gram purchasers from reselling grams on a secondary market. But SEC said they have violated the Section 5 of the Securities Act. Telegram submitted additional documents at the beginning of the status conference hearing and Judge Castel shut down the testimonial record. The senior SEC attorney, Jorge Tenreiro, said grams were sold with no utility to investors who had no interest in crypto outside of speculation.
The Judge paralleled Telegram’s gram sale to gold. Reportedly, Telegram’s first round of grams was locked up for more than a year after the private sale and this lock up actually has no meaning. But allegedly, they made a condition for initial buyers to resell their presale tokens and create a secondary market. The company put in no restriction on reselling. Different words came from the Judge and attorney and the Judge said restriction on reselling was mentioned in the company’s purchase agreement with investors and the attorney said the company was taking investors at their word instead of ensuring no resale.
Another lawyer, Alexander Drylewski, of Telegram wanted to mean that when the TON blockchain launches, grams will no longer be securities. He said Telegram could not be accountable for investors who made secondary market deals without the company’s knowledge because the company had not sold grams on a secondary market prior to the launch of the TON blockchain. However, the preliminary injunction has been kept reserved and there would be a judgment in the case before April 30.