The Legal Tussle between SEC and Telegram Messenger Heats up with latest Court Decree
CBW -External Analyst
Jan, 09 2020
The legal battle between the US Securities and Exchange Commission (SEC) and Telegram Messenger has been heating up with each coming day. In the series of events in the past few weeks, the New York District Court has dismissed the request of the SEC to compel Telegram to reveal its financial records. Though the court verdict goes in favor of Telegram for now, by January 9, 2020, it will have to ascertain that its bank records comply with the Foreign Data Privacy Laws.
Earlier on January 2, 2020, The New York District Court had decreed Telegram to respond to the SEC’s demand to furnish bank records before Friday 10 January. Telegram, however, had refused the SEC’s demand to present the financial documents regarding the details of the $ 1.7billion ICOs funds expenditure. In response, the Telegram had filed another opposition motion which stated that it has furnished enough information to the commission and SEC is trying to pressurize it.
Telegram has been adamant about refusing the SEC's demand to furnish the details of the disbursed amount that has been generated through the unregistered ICO sales. Thus recently on January 2, the SEC had filed a motion of Compel which demands the order from the Judge to present its bank records before the deposition of its CEO Pavel Durov and the other two Telegram employees due on Jan 7-8 in Dubai (UAE). Their deposition has been ordered by the New York court.
A legal battle between the US regulatory body SEC and Telegram Messenger has been going on. The SEC has filed a lawsuit on Telegram for selling unregistered tokens and generating funds. Owing to this legal tussle, in October 2019, the court has restricted Telegram for issuance of the Gram tokens following the SEC’s regulatory enforcement.
Timeline of the Legal Battle
In 2018 January, Telegram Messenger has launched ICO tokens to raise the funds for developing its blockchain-powered TON network. Telegram sold approximately 2.9 million Gram tokens globally and raised $1.7 billion. SEC alleges that ICOs offered by the telegram were unregistered and thus SEC had notified Telegram to register the tokens under Security. But Telegram flatly denied to register them under security as the action would have been made them liable to SEC for violations of the Securities laws.
SEC thus sued Telegram in October. SEC presumes that the interrogation of the bank records will disclose the financial disparity about how Telegram sold tokens to resellers to let them earn a commission. Telegram, however, has been denying the categorization of these tokens under security and claims that the offerings were exempt from the registration under Regulation D for security tokens as they were sold only to the recognized investors. SEC charges that the Telegram has violated the US Securities Act. It thus wants the total disclosure of the entire expenditure about how the ICO funds have been spent. It also wants to access this financial expenditure during the development of the blockchain network. But now with the latest court order, it seems difficult for the SEC to investigate the financial records.
The Launch of the Ton Delayed Due to
This TON blockchain network of the Telegram is supposed to be integrated with the App. TON had scheduled to go live in October 2019 but the event had been postponed due to the suspension order from the court. SEC has been demanding for permanent injunctions, financial disgorgement and financial penalties against the Telegram. It would be interesting to witness this legal battle that may lead to the biggest SEC enforcement action against the illicit ICOs over the forthcoming time.
CBW - External Analyst
False hours ago