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SEC halts Telegram’s $1.7B ICO

Steven Zheng

The Securities and Exchange Commission (SEC) today announced it has filed "an emergency action and obtained temporary restraining order" against two offshore entities behind Telegram's TON digital token offering.

According to the SEC's complaint, Telegram Group and TON Issuer Inc. sold "approximately 2.9 billion digital tokens called 'Grams' at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers."

Telegram also promised to deliver its Grams tokens to initial purchasers by Oct. 31. The SEC is alleging that Telegram and TON Issuer Inc. failed to register the sale and offering of Grams, stating that the tokens are "securities." 

“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”

“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token,” Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

Earlier this week, Telegram made the first public acknowledgment of its involvement in TON. As reported by The Block, the firm mentioned both TON and GRAM in its terms of service (ToS) on its official website.