Global messaging giant Telegram has been battling the Securities and Exchange Commission (SEC) over their 2.9 billion gram token sale that raised a massive $1.7 billion. The complaint alleges that Telegram did not register with the SEC for the sale and the SEC placed an emergency restraining order against the Telegram Group and its subsidiary TON.
The SEC then presented fresh evidence in the case on January 10 that alleges Telegram of selling its token even after their ICO was completed.
According to the filing, Investment fund Da Vinci Capital and another entity called Gem Limited had requested commissions of $209,783 and $1.1 million, respectively, for “subsequent sales” of purchase agreements for grams, the future tokens for Telegram’s blockchain project TON.
Da Vinci Capital sold over $2 million worth of grams to a fund managed by its portfolio company, ITI Funds, on June 20, 2018. Gem Limited sold 7.8 million euros ($8.6 million) worth of grams to a firm named Goliat Solutions and $4.5 million to Space Investments Limited on July 2, 2018.
According to Philip Moustakis, a counsel at Seward & Kissel and former senior counsel at the SEC, the SEC has argued that under Regulation D, the issuer should take responsibility for ensuring that the purchasers don’t act as statutory underwriters.
Telegram argues that the commissions were finders’ fees to non-U.S. persons and entities for introducing grams to other investors while it is under pressure from the SEC, who wants access to Telegram’s financial data from its token sale.
The latest filing with the Southern District of New York (SDNY), has asked Telegram to present all the financial data within February 26. This SDNY had previously rejected the SEC’s attempt to get the bank records from Telegram related to its token sales.
The lawyers representing Telegram later claimed that a review of their financial records could take as long as five to seven weeks.
The latest ruling will allow Telegram to redact the information provided to the court in accordance with foreign privacy regulations. According to a letter to the court from the attorneys for the defense, Telegram will provide the SEC with the redacted bank records in full by Jan. 15.
The next session in court would be something to look out for and see what the SEC finds in the new documents and how to court proceeds. The next few moves could decide the fate of Telegram’s blockchain project TON.
Will TON investors be Gainers or Losers?
Investors of the Telegram Open Network (TON) project had to agree to not demand their money back, after a majority of them decided to wait for the launch of the blockchain platform until April 2020. Following SEC’s restraining order that froze the blockchain project in its tracks.
The battle between SEC and Telegram continues as Telegram on its part has continued to refuse all allegations made by the SEC. The company recently claimed that “if and when” Gram tokens launch, “they will constitute a currency and/or commodity – not securities under the federal securities laws.”