Gram Token Injunction Could Go Down to the Wire

Published at: Feb. 20, 2020

Following a two-hour hearing, a New York federal judge has extended the restraining order that prohibits Telegram from distributing its Gram tokens.

On Feb 19, Judge P. Kevin Castel of the US District Court for the Southern District of New York reserved judgment on the US Security and Exchanges Commission (SEC)’s request for a preliminary injunction regarding Telegram’s 2019 Gram sale.

The SEC believes that the Gram token - which the company described as a utility token for the forthcoming Telegram Open Network (TON) - is a security. The regulator shut down Telegram’s ICO last October and an injunction from the time blocking distribution of Grams was set to expire on February 19.

Investors May Get Refunds if TON Doesn’t Launch Before April 30

The judge assured Telegram’s lawyer Alexander Drylewski that he is mindful of the looming April 30 deadline. A clause in the Gram purchase agreements specifies that ICO participants can claim a refund on their investment should Telegram fail to launch the TON before that date. However the date was originally set for October 2019.

Drylewski agreed to prolong the injunction after the judge said that the court would make an immediate decision should the company reject the extension.

The SEC Takes Action Against Telegram

Despite being halted by the SEC, Telegram‘s ICO is the second-largest ICO to-date, having raised roughly $1.7 billion since January 2018 in the form of two token sales. The SEC accuses Telegram of violating Section 5 of the Securities Act of 1933 by failing to register the token sales as securities.

Tags
Regulation
Sec
Ico
Telegram
Ton
Related Posts
Telegram Offers ICO Investors Refund or Option to Hang On Till April 2021
Encrypted messaging platform Telegram appears to have accepted a United States court ruling that the company cannot distribute its Grams tokens or launch the Telegram Open Network (TON) until the dispute has been resolved. With Telegram missing its deadline to launch TON by April 30, a refund clause in Telegram’s purchase agreements means that investors can now claim refunds. However, while proposing an immediate refund of 72% of investors’ stakes, the platform is also offering repayment of 110% on April 30, 2021. Investors who opt to accept the loan may be able to redeem their stake for crypto assets in …
Regulation / April 30, 2020
Telegram Asks Court to Appeal Halt on GRAM Distribution
Telegram is seeking to appeal a United States federal court’s recent ruling in favor of the Securities and Exchange Commission to halt distribution of GRAM tokens. Rejection of the injunction and the status of the investment contracts In response to the court’s preliminary injunction earlier the same day freezing GRAM issuance until at least the trial, Telegram filed a brief notice of appeal with the Court of Appeals for the Second Circuit. The injunction itself tentatively agrees with the SEC’s argument that the contracts governing GRAM issuance — though critically, not necessarily GRAM tokens themselves — seem to qualify as …
Regulation / March 25, 2020
Redactions Granted in Telegram Case to Protect ICO Participants
A U.S. District Judge has approved the majority of redaction requests received during the proceedings surrounding the Securities and Exchange Commission’s (SEC) lawsuit against messaging firm Telegram over its $1.7 billion initial coin offering (ICO). The SEC took action against Telegram in October 2019, filing a temporary restraining order barring Telegram from distributing its tokens. The SEC submitted a cache of documents in support of its temporary restraining order, including roughly one dozen exhibits that revealed the strategic considerations of venture capital firms and investors who participated in the ICO and later cooperated with the SEC. The documents were filed …
Regulation / June 19, 2020
Telegram Agrees to Hand Over Trove of ICO Documents to SEC
Telegram has filed an order of consent agreeing to provide a trove of communications and documentation requested by the United States Securities and Exchange Commission on May 7. The communications concern the distribution of Telegram’s Gram (GRM) tokens and purchase agreements relating to its 2018 initial coin offering. Telegram’s consent comes amid the Free Telegram Open Network community’s decision to launch a version of the TON blockchain via a "fork." The SEC halted Telegram’s offering in October 2019 for conducting an unlicensed offering of securities. After six months of proceedings, New York District Judge P. Kevin Castel issued a preliminary …
Regulation / May 8, 2020
Telegram Seeks Clarity On The Preliminary Injunction Against TON
How far can a preliminary injunction from an American court reach? The answer to that question is everything for Telegram’s embattled TON blockchain project. TON has been under legal fire since shortly after the SEC became aware of its token sale. The drama is ongoing as recently as this week, when a federal district court judge issued a preliminary injunction against Telegram for its ten-figure initial coin offering. The allegation is that Telegram’s GRAM token, operating on the TON blockchain, was illegally being sold as a security, and the judge effectively took the SEC’s side on the case. Filing an …
Regulation / March 27, 2020