Last week, news broke that the United States Securities and Exchange Commission (SEC) had filed against Telegram Group Inc. and TON Issuer Inc., the messaging app and its subsidiary that are collectively responsible for the creation and issuance of the Telegram Open Network (TON) and its native cryptocurrency, Gram tokens.
The filing, which came on October an 11th, amounted to an emergency action that was intended to prevent Telegram from distributing Gram tokens. In it, The SEC accused Telegram of selling unregistered securities.
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However, according to Telegram’s counter-filing, its tokens are not securities, and the emergency action filed by the SEC “runs counter to longstanding Supreme Court precedent, the SEC’s own views relating to other cryptocurrencies, and common sense.”
Telegram also asked the court to deny the SEC’s request for an injunction.
Telegram response to the SEC https://t.co/y0XdJYdupL
— Erik Voorhees (@ErikVoorhees) October 17, 2019
Therefore, if the legal case doesn’t go well for Telegram and Ton Issuer, the two companies could have a lot to lose: “the worst case is losing the case, having to disgorge all the money they got for Grams–including money they’ve spent already–and pay a fine on top of that.”
Even if the SEC’s filings don’t have a direct effect on Telegram’s operations, Mikko Ohtamaa pointed out to Finance Magnates that the indirect consequences of the filing could have serious effects on Telegram: “Telegram heavily depends on Apple and Google app stores, both publicly listed US companies,” he said.
Therefore, for Ohtamaa, “the worst-case scenario is that Telegram gets pulled from the app stores, their assets are frozen in overseas accounts and also they are dragged to the US lawsuit indefinitely. This doom scenario would kill Telegram overnight.”
Pauline Shangett imagined a worst-case scenario in which investors “won’t receive their Grams altogether,” although “that’s unlikely to happen since the US jurisdiction doesn’t equal worldwide jurisdiction.”
What does the future hold?
Still, it’s possible that US investors may never receive their Grams–or that if they do, it won’t happen for quite some time.
“I think it’s quite likely Grams will never be distributed,” David Gerard said to Finance Magnates.
“I don’t think Telegram is foolish enough to go ahead right now with the offering, as they were planning,” he continued, adding that “[it] depends if they can convince the court on 24 October to lift the temporary restraining order against them releasing the Gram tokens.”
Braden Perry told Finance Magnates that “if TON tokens are not distributed, the offering documents likely mandate a refund to the investors. This could lead to massive financial difficulties as, according to the SEC’s complaint, the company raised over $1.7 billion from the sales and promised to deliver tokens by October 31, and roughly 33 percent were sales to US investors.”
“Miko Ohtamaa predicted that “if Telegram chooses to face the SEC and try to negotiate, it will be delayed indefinitely.”
At this point, however, to go ahead with the token launch would be to move in direct opposition with the SEC: “the only way for them to release tokens with the schedule is that they do it ‘rogue’ and ignore the SEC notice.”
And indeed, Telegram seems to have agreed to hold off on the launch of the TON blockchain–for now. “However, there is USD $400M investor money there and these investors then would be given tokens that the SEC they should not have,” Ohtamaa said. “It would be an interesting turn of events.”
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