25 March 2020

Federal judge orders Telegram to refrain from issuing GRAM tokens

A federal court judge has sided with the Securities and Exchange Commission (SEC) and ordered Telegram to refrain from issuing the GRAM tokens it sold in a $1.7 billion SAFT offering. According to the judge, the SEC has demonstrated a "substantial likelihood of success in proving" that Telegram's current distribution plan (the secondary sale of GRAMs to retail investors) violates securities laws. The order carries on to say:

Telegram knew and understood that reasonable purchasers would not be willing to pay $1.7 billion to acquire Grams merely as a means of storing or transferring value. Instead, Telegram developed a scheme to maximize the amount initial purchasers would be willing to pay Telegram by creating a structure to allow these purchasers to maximize the value they receive upon resale in the public markets.

Why it matters: - This order is not the end of the SEC vs. Telegram case yet. But it's not good news for Telegram and, at the very least, marks a significant setback in its effort to launch the TON (Telegram Open Network) blockchain. After the SEC halted Telegram from distributing GRAMs back in Oct. 2019, the messaging platform provider postponed the launch of TON to Apr. 30, 2020, with permission from investors. If Telegram fails to launch TON by that date, investors may have the right to get their money back. Today's order may force Telegram to ask investors to postpone the release date once again. - This case could also have a widespread impact on other SAFT raises, especially for those projects that have yet to launch. Based on previous SEC rulings, some assume that pre-launch securities can change to a non-security post-launch "if the network is sufficiently decentralized." But projects may not have the chance to achieve an acceptable level of decentralization if regulators halt the secondary sale of tokens due to existing securities laws.

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A federal judge has rejected Telegram’s request to carry out the distribution of GRAMs to non-US investors, stating the company failed to explain how it could effectively fence off US investors or “lawfully modify” the sales agreements. The decision comes less than a week after the same judge ordere...
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