The Verdict of the Telegram Vs. SEC Token Sale Case Delayed


In the latest trial between the SEC Vs.
Telegram, the US Federal Court had ordered the SEC and the messaging platform
Telegram to not to hold on the Telegram’s illegal Securities Offering issue.
During another hearing on February 19, at
the U.S. District Court for the Southern District of New York, Judge Kevin
Castel urged both the parties to consider the ‘economic realities’ of the $1.7
billion Gram token sales while recognizing that ‘disclaimers don't control’ how
the court visions the asset.
Telegram vs. the Securities and Exchange
Commission (SEC) Trial
The trial between the Telegram and the
Securities and Exchange Commission (SEC) SEC began in October 2019. The SEC has
banned the Telegram’s Gram Token which was scheduled to be launched in October
2019 as it considers it as security and insisted the Telegram follow the
relevant regulations for securities. Whereas the Telegram has challenged the
SEC's mandate to disclose the financial information of the company.
By selling the Gram tokens company raised $
1.7 billion, which the Commission considers illegal since the gram token has
not been registered at SEC as securities and investors are unaware of the
financial status of the company.
Telegram, on the other hand, considers GRAM
token as a cryptocurrency and not as security and thus it is certain that it
has not violated the Reg. D securities’ standard. It accuses SEC that it has
failed to ensure clear regulation and condemned it for disclosing the
correspondence between Telegram representatives and its private investors
publically.
Arguments from both parties heated up in
today’s trial
Telegram’s lawyer once again reassured the
court that the 36 validators have displayed an adequate interest in the Telegrams
test net blockchain proving the interest of the crypto community.
The Securities and Exchange Commission (SEC)
however was repeating the alleged legal violation about how the sale to the accredited
investors has not been done according to Reg. D standards. SEC further accused
the Telegram about violating the Federal Securities laws regarding its token
sale.
The Attorney further accused that Telegram
did not restrict the token resale in the secondary market by the initial gram
purchasers.
SEC senior trial Attorney George Tenreiro
said that they are submitting the next step in a public offering in violation
of Section 5 of the Securities act.
Tenreiro argued that the Gram tokens were sold
with no utility to investors who were disinterested in crypto outside of
speculation. SEC advocate further pointed out that investors' memo returns in
the double and triple digits can be considered as a clear raising of capital.
George Castel linked Telegram’s Gram sale
to gold saying that the seller would not ask individuals if they were
interested in gold before selling the precious metal on which investors often
speculate.
Tenreiro said Telegram’s first round of
Gram sales was locked for more than a year after the private sale of tokens.
Telegram had not further provided reasonable justification for the lockup which
provoked the initial purchasers to resale their presold tokens and create a secondary
market.
He further accused the Telegram of being responsible
for the ‘akin to underwriters ‘without registration.
Telegram lawyer Alexander Drylewski argued
that the Howey test does not apply to digital-assets unless these assets are
offered with the increase of value over time. This implies that when the
blockchain launches, the Graham tokens will no longer be considered as
securities.
He further added that Reg. D exemption
should be given to the private investors and that the Telegram should not be
held responsible for investor deeds which include the resale of the tokens and
creation of a secondary market without the knowledge of the company.
The Verdict will be read before the launch
of Ton Blockchain
Castel has reserved the judgment on the preliminary
injunction and issued Telegram that the judgment will take place before the
scheduled launch of the TON blockchain.
#Blockchain #securities #HoweyTest #cryptocurriencies #SEC #Telegram #Gram #Token #RegD

Jayashree Ingle
CBW - External Analyst
INDIA