Telegram Denies SEC Token Security Claims and Asks for the Lawsuit to Be Dropped
Telegram has asked the US court to drop the action brought against it by SEC, the Securities and Exchange Commission.
SEC accused Telegram of launching an in-house cryptocurrency that is a security. Tuesday, the messaging app firm refuted the SEC allegations in the New York Southern District Court. The case was brought in last month and addresses issues such as the company’s nature, its team, and details about its fundraiser.
Telegram Stopped from Flooding the US Markets with Digital Tokens
On October 11th, SEC got an emergency restraining order to stop Telegram and its' subsidiary from developing the TON blockchain network, which has already sold Gram tokens for $1.7 billion. Stephanie Avakian, the co-director of SEC’s Division of Enforcement said then that the action was urgent so that Telegram doesn’t flood the US markets with illegally sold digital tokens.
Gram Tokens Not Issued Until the Launch of the TON Blockchain
While the Gram tokens have been sold, they didn’t get issued and distributed. This was supposed to happen when the TON blockchain would have been launched, on October 31st. Since SEC filed a case in Court, the launch was stopped. In the latest filing, Telegram said that:
“[The SEC’s] claims are without merit as Telegram’s private placement to highly sophisticated, accredited investors was conducted pursuant to valid exemptions to registration under the federal securities laws and Grams will not be securities when they are created at the time of launch of the TON Blockchain.”
Co-Director at SEC Says Telegram Is Trying to Avoid Federal Laws
Steven Peikin, another co-director for the SEC Division of Enforcement has stated in an announcement that Telegram can’t avoid federal securities laws by naming their product cryptocurrency or digital token. He also added that the company is looking to gain benefits from public offering while not complying with the responsibilities meant to protect those who are investing.
Telegram Accuses SEC of Regulating by Enforcement
Telegram took its stance in the filling, saying that SEC-regulated improperly and by enforcement when it comes to the law, also that it didn’t offer the proper guidance or provided notice on its views regarding what violating the federal securities laws means. It continued by saying SEC is adopting the ad hoc legal position, contradicting the judicial precedent and the public opinions of its officials. It also claimed that it voluntarily tried to obtain guidance on not breaking the federal securities laws from SEC, but that it didn’t get any response prior to the enforcement action SEC has taken.
Telegram Didn’t File an SEC Registration Statement
Stressing that Gram tokens haven’t even been created yet, Telegram claimed the tokens are meant to constitute a currency and at the same time commodity, not security. It also said that an SEC registration statement wasn’t filed because it wasn’t “required under the federal securities laws.” The firm asked the court to deny and dismiss the SEC’s claim for relief.
The Next Hearing is In February
Things won’t be decided yet, as there’s another hearing in February, on the 18th and 19th. The initial date for this hearing was October 24th, but it got postponed so that both parties have time to make some more discovery on the case. In the meantime, Telegram has announced that it has delayed the launch of the token and the TON blockchain until after the hearing.