Telegram gets SEC halt on token sales after $1.7 billion ICO

Bloomberg

The Securities and Exchange Commission (SEC) obtained a restraining order to stop the encrypted messaging app Telegram from flooding the US with digital tokens, claiming that its coins are unregistered securities that can’t be sold to American investors.
The order halts Telegram from selling digital tokens known as Grams, according to a complaint unsealed in federal court in Manhattan.
The enforcement action is one of the SEC’s most high-profile cases involving cryptocurrencies to date.
Telegram raised more than $1.7 billion in 2018, with plans to deliver almost 3 billion Grams to its investors by the end of October of this year.
The SEC said the fundraising was illegally marketed in the US because Telegram never registered its offering with the regulator. Telegram raised $424.5 million from 39 US investors, according to the SEC.
An attorney for Telegram didn’t immediately respond to a request for comment.

High Demand
The SEC’s move is a blow to the broader digital-token industry because Grams were expected to be met with high demand from crypto-enthusiasts. Many large developers and service providers like Coinbase Inc and Anchorage announced their support for Gram earlier this month — even before the coins were issued.
At first, Telegram didn’t file any documents with the SEC in connection with its offering. Only after being contacted by officials in the agency’s enforcement division did Telegram disclose that it had raised $850 million in two separate Gram offerings that were sold to wealthy investors.
Telegram is led by Pavel Durov, founder of Russian social network VK. He has been in a self-imposed exile following clashes with Russian authorities. Telegram itself was banned in Russia last year, supposedly for its unwillingness to give the government a way to track users’ activities. The company highlights privacy on its website, saying users of its service can send secret chats on their smartphones and other devices through “self-destructing” messages, photos and videos.
While the SEC’s order is about marketing Grams in the US, private securities lawyer Zachary Fallon cautioned that the enforcement action could also complicate Telegram’s ability to sell the coins in other jurisdictions. “I don’t think that would be wise,” said Fallon, a former SEC attorney who’s now a partner at Blakemore Fallon.
The SEC has been sounding the alarm about initial coin offerings for years, arguing that most of the tokens involved are securities that must comply with federal regulations.