P Xenos and M Bacina
Telegram's Response to SEC litigation filed
On Oct. 11, the SEC obtained an emergency restraining order to halt the launch of the Telegram token Grams. This token was sold in one of the largest Initial Coin Offerings of 2017/2018 raising a total of USD$1.7 billion.
The hearing at the Southern District Court of New York was then scheduled for Oct. 24.
Telegram will now have to wait until next year to make its case that its “Gram” token is not a security.
According to reports, the hearing on the case has been postponed until Feb. 18–19, 2020, pushed back from an Oct. 24. slot.
Telegram committed to delaying the launch of the TON blockchain project and gram issuance to the project’s token purchasers until April 30, 2020, so it had time to deal with the SEC’s concerns.
In a court filing and emails to TON purchasers, Telegram disagreed with the SEC that grams are securities, expressing frustration over the agency’s late motion to halt the upcoming late October launch. Telegram's arguments include:
That the SEC's "emergency" was "of its own making";
That Telegram had provided 5 legal opinions to the SEC over 18 months on the securities question;
That Grams were only ever sold to "highly sophisticated investors" and that sale was in accordance with US securities laws.
That the eleventh hour filing for an emergency injunction was designed to gain a strategic advantage in litigation for the SEC;
Telegram has responded to the SEC moving to treat the token itself as a security (as distinct from the offer of the tokens being treated as the offer of a security) with fighting words, saying:
The SEC's action hinges on a fundamentally flawed theory that Grams constitute a "security" subject to the U.S. securities laws - a theory that runs counter to longstanding Supreme Court precedent, the SEC's own views relating to cryptocurrencies, and common sense.
So far, the judge hearing the case, P. Kevin Castel, has ruled that Telegram should not distribute its token until the court makes its decision on the case.
As it postponed the launch, Telegram further offered token purchasers the chance to approve the date change, adding that if the majority of gram holders disagree with the delay, they will receive 77 percent of their token purchase payment back.