The US Securities and Exchange Commission last week placed an emergency injunction on the Telegram token due for issue on October 11, alleging breach in securities law. The regulator announced that Telegram’s plans to issue the Gram token contravenes securities law likening it to sale of unregistered securities.
In a response to the injunction, the messaging app company asked a federal court to bar the regulator from placing restrictions on its token and also debar SEC from compelling it to produce witnesses and documents about its blockchain project.
The response to last week’s SEC action was filed on Wednesday as the company works to ensure that its plans to launch the Gram token is not scuttled by the agency. In the filing made by the Telegram attorneys, the company claimed that SEC action contradicts long-standing precedent of the Supreme Court of the United States, SEC’s own view of cryptocurrencies and common sense.
The filing explained that Telegram “did not … offer any securities to the public” through an ICO, referencing the $1.7 billion it raised using a Simple Agreement for Future Tokens (SAFT) framework.
“Telegram entered into private purchase agreements with a limited number of highly sophisticated purchasers (the ‘Private Placement’) that provided for the future payment of a currency (grams) but only following the completion and launch of the TON Blockchain,”
the filing said, adding:
“Significantly, Telegram has already treated the Private Placement as a securities offering pursuant to valid exemptions to registration under the Securities Act of 1933. The grams themselves, as distinct from the purchase contracts, will merely be a currency or commodity (like gold, silver or sugar) — not a ‘security’ — once the TON Blockchain launches.”
Telegram has made it clear nonetheless that it is prepared to hold off launching of the gram token pending the resolution of the issues with SEC. in a broadcast via email to investors, the company made it clear that the planned launch would no longer be tenable due to the recent lawsuit by SEC.
In the email, Telegram made exception to the clause on its agreement with investors which would warrant a refund of their investments if the gram token was not launched by October 30. The company asked for an extension of the deadline in view of recent happenings.
“There is no need for the Court to enter a preliminary injunction, which has the potential to be misconstrued by Telegram’s private placement subscribers and the public in this highly-publicized matter, where Telegram has already voluntarily agreed not to engage in the very conduct that the SEC is seeking to enjoin,”
the filing said.
Telegram lawyer also asked the court to expedite action on the suit while tendering the correspondence between the company and SEC.