The US SEC demanded to stop the TON project and banned the distribution of Gram tokens

David Kemp

The US Securities and Exchange Commission has requested the suspension of the TON project. The regulator is sure that Durov’s company is conducting activities related to the illegal sale of cryptographic currencies. Therefore, it was decided to stop the sale of Telegram tokens in the amount of $ 1.7 billion.

Commencement of the Trial

The US SEC filed a lawsuit in the Manhattan court, which decided to ban the sale of digital currency Gram. The regulator said that the decree applies to Telegram Group and its subsidiary TON Issuer.

According to SEC, Telegram structures should register the sale of Gram as a securities transaction. However, the messenger did not provide data on business, financial condition, risks and management. This must be done, as such a requirement is directly established by the United States Securities Act of 1933. Now the SEC aims to prevent Telegram from releasing tokens sold illegally to the US markets. You can read more about the regulation of digital money in America in the article "Regulation of cryptocurrency in the USA."

TON Token Sale History

Telegram Group launched the sale of TON in early 2018. According to SEC, tokenization was raised 1.7 billion dollars due to the sale of 2.9 billion tokens at a discount. In total, over 170 investors have acquired the cryptographic asset, of which about four dozen are from the United States. In total, all American investors account for over a billion tokens, for which $ 424.5 million was paid.

The goal of Telegram Open Network tokens sale is to obtain the funds needed to develop a blockchain platform and actively develop Telegram. According to SEC, the organization planned to transfer tokens to the owners on the last day of October 2019. After that, the opportunity should be provided to conduct sales transactions with Gram in the US markets.

Pavel Durov did not respond to the ban decision of the SEC until this time. A Telegram investor announced the possibility of placing tokens outside the United States.

Suspicions regarding Telegram

The key claim of the US SEC lies in the opacity of the company's business model. This may be perceived as a violation of federal law, namely:

  • The Gram acquisition agreement does not have an organization’s financial history or information about its ability to create profit. Therefore, buyers do not have comprehensive information about the advisability of investing in a token. It is also not known what remuneration as a result of the initial placement of coins will receive company management.
  • Gram is not registered in any jurisdiction.
  • Transactions can be carried out completely anonymously after the release of tokens, this is facilitated by the messenger infrastructure. Therefore, it will be difficult to know who are the key investors in Telegram. There is no data on whether participants will be identified in the secondary market.

What’s important to know about Telegram cryptocurrency

The sale of cryptographic currency may become the second largest token in the history of blockchain. The record belongs to Block.one from the Cayman Islands. During the ICO, the startup was able to raise $ 4.1 billion in May 2019.

The developers of the TON blockchain platform intend to build an ecosystem of different services on its basis, including the TON Payments payment system, the TON Proxy lock crawler, the TON Storage file storage, and others. In white paper it is noted that the created blockchain will be able to process millions of operations per second. At the same time, Bitcoin has an indicator of only 9-13 transactions per second. Initially, TON will be used in Telegram, but over time it can be implemented in various social networks and services.

During the first round of coin placement, Gram cost 37 cents, the second - $ 1.33. At launch, the recommended cost will be at $ 3.62 per token.

Important summaries from the SEC lawsuit

The Commission in a lawsuit stated the following facts about the business and condition of Telegram:

  • The release of the beta version of Telegram was made in 2013. The main investors were not only Durov brothers, but also a private individual from Buffalo.
  • 500 million Gram coins (approximately 10 part of all coins) are allocated to pay for services for the platform from external developers. An additional 100 million coins will be received by the Durov brothers. The same amount has been allocated for system developers, another 1.4 billion coins will be spent on other needs of the TON Foundation. A quarter of them will be transferred to users of the messenger.
  • At the beginning of February 2019, Telegram spent $ 218 million of the raised $ 1.7 billion. Money spent on the development of the blockchain and messenger.
  • About 56% of all coins that are planned to be issued must be received by institutional and other first investors. 

What effect will the SEC lawsuit have on launching cryptographic currency transactions? Probably no one knows. Telegram did not provide any clarification on this issue. Durov's team in a letter indicated that it did not agree with the position of the SEC. Ihe team is looking for ways out of the situation, including the likely delay in launching the project, and hopes to provide more information.

Durov and Telegram company are confidently looking to the future regarding their offspring. There is not only one successfully implemented project behind their shoulders. Therefore, if you have the opportunity to purchase TON tokens, make a reasonable investment. It is important to remember about the risks, inherent in any blockchain-projects. Our portal will also inform about other opportunities for investing in cryptocurrencies and blockchain projects.