The US Securities and Exchange Commission (SEC) announced the adoption of “emergency measures and restrictions” in relation to two offshore companies associated with the Telegram Open Network (TON) token sale. This was reported on the website of the department.

The Commission believes that Telegram illegally distributed unregistered digital tokens in the United States and abroad, so the company managed to raise $ 1.7 billion. Telegram Group and TON Issuer Inc. sold at a reduced price “approximately 2.9 billion digital tokens called Gram 171 to the original buyer. In particular, 1 billion tokens were sold to 39 American buyers. ”

Telegram has committed to delivering Gram coins to its original customers by October 31. At the same time, the SEC claims that Telegram and TON Issuer Inc. offered investors securities without properly registering token sale and without disclosing material information.

“The emergency measures we took to prevent the flooding of the US market with digital tokens, which, in our opinion, were sold illegally ,” said Stephanie Avakyan, SEC Co-Director of Law Enforcement. “ We argue that the defendants did not provide investors with complete information about Gram, Telegram's business operations, its financial condition, risk factors and management, as required by securities laws.”

The representative of the same unit, Stephen Paykin, noted that Telegram seeks to benefit from the initial offer, not observing the long-established requirements for the disclosure of information aimed at protecting the rights of investors.

“We have repeatedly stated that issuers cannot escape the action of federal securities laws by simply calling their product a digital token ,” he emphasized.

According to a statement filed with the Manhattan Federal Court, the SEC accuses both companies of violating sections 5 (a) and 5 (c) of the Securities Act and demands an unlimited injunction on the project and a decision to refund investors with a fine and interest.

A lawyer specializing in the cryptocurrency industry, Catherine Wu, noted that the SEC’s order is not final and the satisfaction of the department’s requirements will depend on the court’s decision.

Note that this was filed by the the SEC to immediately halt the distribution of Telegram's tokens (which was supposed to happen October 31).

The rest of what the SEC is asking for (disgorgement, etc) will depend on what the federal court in NY decides. This order is not final! https://t.co/BhHFZzn1k1

– Katherine Wu (@katherineykwu) October 11, 2019

“Please note that the SEC is seeking an immediate suspension of the distribution of Telegram tokens, due on October 31”

According to Binance Research, even though the TON token sale was carried out in accordance with rule 506 (c) , which assumes that all buyers should be accredited investors, this rule does not apply to the secondary market and the sale of new Gram tokens.

(1/3) The SEC has filed an emergency action to stop the Telegram Open Network. https://t.co/UmotRgEcVq

TON's token (Grams) are considered securities. Initial funding was raised under an SEC exemption, this exemption doesn't cover secondary market trading & the sale of new Grams

– Binance Research (@BinanceResearch) October 12, 2019

Earlier, BlockchainJournal published a lot of material about the technical and economic features of TON, possible problems in the way of its full-scale implementation, as well as its similarities and differences with Libra from Facebook.

Subscribe to BlockchainJournal news in Telegram: BlockchainJournal Live – the entire news feed, BlockchainJournal – the most important news and polls.