One of the most significant blows to a cryptocurrency project played out this past week as the much-anticipated launch of the Telegram Open Network (TON) – Telegram’s blockchain and cryptocurrency network – was shut down at the eleventh hour by the SEC.
The SEC filed an emergency action restraining order against Telegram and TON, stating that the forthcoming GRM token constituted an unregistered digital token offering. This follows one of the largest ICOs ever recorded, the $1.7 billion offering in early 2018.
The SEC alleges that Telegram and TON did not register their sale of GRM tokens, which the SEC considers securities. Because the Securities Act of 1933 requires that all securities be registered with the SEC, the agency considers the sale of GRM tokens “unlawful,” and acted to stop the official launch.
This was an unexpected hammer blow for Telegram and TON with the hype finally building towards the launch of the token. Now, the company has to revert back and look at what options it has going forward.
It has been reported that TON has been trying to get feedback from the SEC about their token launch for the past 18 months, and has not been successful. This has led to the TON informing its members of their opinion of the matter.
“We were surprised and disappointed that the SEC chose to file a lawsuit under these circumstances, and we disagree with the SEC’s legal position,” TON allegedly told investors.
TON may only find out more about what they can, and cannot do, with their project after October 24 – the date that has been set for a court hearing on the matter following the restraining order.
TON Board is a private channel created by investors and for investors in the TON as well as for future major holders of Grams. The channel has around 2,400 subscribers at press time.
Perhaps the biggest question to be asked about this SEC involvement is what do the high-profile investors in Telegram’s $1.7 billion ICO, including Benchmark, Sequoia and Lightspeed, think of this regulatory shut down?
The major venture capital firms would have invested in the assurances that TON had passed regulatory scrutiny and that it would not be a factor in its launch. However, this is a misrepresentation, and a lot of these firms will no doubt be fuming.