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Telegram’s claim “Grams will not be security once TON Blockchain launches” is insufficient, argues SEC

Fri, 18 Oct 2019, 12:51 pm UTC

In a new filing, the U.S. Securities has responded to Telegram’s counterclaim, arguing that the messaging giant is likely to violate federal securities laws again.

In response to the restraining order obtained by the SEC, Telegram had filed a counterclaim on October 16, insisting that Gram is not a security and requesting the court to deny the preliminary injunction.

The SEC did not take much time to respond with a new filing in the U.S. District Court for the Southern District of New York on Oct. 17, Cointelegraph reported.

The regulator argues that Telegram’s claim that “Grams will merely be a currency or commodity” and therefore not a security “once the TON Blockchain launches” is insufficient to rebut its prima facie showing for two reasons:

“First, whatever Defendants contend Grams “will . . . be” at some future date says nothing about what Grams were in 2018 when Defendants offered and sold them without a registration statement, which is the heart of the SEC’s claim that a past violation of Section 5 has occurred.

“Second, with respect to whatever Grams were in 2018 or what they will be whenever Defendants decide to distribute them, Telegram’s mere assertion that Grams “will . . . be” a “currency” does nothing to cure the prior violation of law.”

The SEC goes on to say that Telegram is likely to “again violate securities laws” and requests the court to grant a preliminary injunction. It pointed out that Telegram’s request to deny the injunction will allow them to “engage in violative conduct after five months, and put the burden on the SEC to seek another TRO [temporary restraining order] from the Court.”

“The Court should reject the requests in Defendants' Opposition in their entirety and require Defendants to abide by the requirements the Court has ordered,” the SEC said.

A court hearing in the case will be held on October 24 in New York.

Just recently, Telegram 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.

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