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Messaging giant Telegram has filed a response to the U.S. Securities and Exchange Commission (SEC), which obtained a restraining order last week against the company alleging that it conducted an unregistered token sale offering in violation of federal security laws.
The company has argued that that the SEC’s emergency injunction was “unreasonable and wholly unnecessary” particularly as it has been voluntarily engaging with the regulator for the last 18 months regarding the development and planned launch of its decentralized blockchain platform, called the “TON Blockchain,” and Grams. It said:
“Notwithstanding these time-consuming and extensive efforts, and despite the SEC knowing for 18 months that if the TON Blockchain did not launch by October 31, 2019,Telegram would be obligated under its agreements with private purchasers to return the funds it raised, the SEC
- never requested that Telegram delay the launch of the TON Blockchain;
- never advised Telegram of its intention to seek injunctive relief; and
- waited until the eleventh hour to file an ex parte application to enjoin Telegram’s launch.”
Further, Telegram argued that Grams tokens are not securities, adding that the SEC’s recent action on the matter “runs counter to longstanding Supreme Court precedent, the SEC’s own views relating to other cryptocurrencies, and common sense.”
It goes on to explained that it did not offer any securities to the public through an ICO, rather entered into “private purchase agreements with a limited number of highly sophisticated purchasers (the ‘Private Placement’) that provided for the future payment of a currency (grams) but only following the completion and launch of the TON Blockchain.”
Telegram clarified that it treated the private placement as a securities offering in compliance with the Securities Act of 1933. It added:
“The grams themselves, as distinct from the purchase contracts, will merely be a currency or commodity (like gold, silver or sugar) — not a ‘security’ — once the TON Blockchain launches.”
However, Telegram said that it has agreed to not make any offers, sales or deliveries of Gram tokens until the court resolves the legal issues in this matter.
Just recently, the company sent an email to its investors informing them about its plans to postpone the launch of the TON Blockchain to April 2020 and seeking their consent in this regard.
Telegram has asked the court to “deny the SEC’s request for a preliminary injunction and enter an order that maintains the status quo regarding the offer, sale or distribution of Grams; relieves Telegram of any obligation to produce documents or witnesses in response to the SEC’s emergency requests prior to October 24; and directs the parties to submit an expedited case schedule to resolve the legal issues underpinning the SEC’s claims.”
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