SEC vs Telegram Group Inc

[Baofeng]

New documents filed by SEC in New York with additional details, stating the GRAM is indeed a security token. Even citing Shyam Parekh, a Telegram employee who told an accountant that "that the unnamed investor has the right to 72,835,916.68 Gram tokens". A bit messy to be honest, but let's see how Telegram will respond with all the allegations here.

Rule 56.1 Statement — Document #80
District Court, S.D. New York

Docket Number: 1:19-cv-09439-PKC

Date Filed: January 15th, 2020

https://www.courtlistener.com/docket/16325310/80/securities-and-exchange-commission-v-telegram-group-inc/

[1714940944]

1714940944

[1714940944]

1714940944

[1714940944]

1714940944

[1714940944]

1714940944

[1714940944]

1714940944

[gentlemand]

I remember reading somewhere that some kind of legal nuance means their token can never be exchanged over, y'know, Telegram. That kind of erases whatever point or advantage there was in the first place.

[CryptoBry]

New documents filed by SEC in New York with additional details, stating the GRAM is indeed a security token. Even citing Shyam Parekh, a Telegram employee who told an accountant that "that the unnamed investor has the right to 72,835,916.68 Gram tokens". A bit messy to be honest, but let's see how Telegram will respond with all the allegations here.

I am sure that the outcome of this case will have bigger and far-reaching repercussions to the whole cryptocurrency industry as this can be the basis of future judiciary decisions on defining whether a token can be security or not. Telegram has the best opportunity to present all the legal arguments before the court that SEC is wrong on its conclusion that GRAM is a security token and therefore Telegram made legal mistakes in introducing such a digital asset to the public. Honestly, however, I am seeing that eventually the two sides on this legal maneuvering will be settling on a compromise.

[hugeblack]

The evidence that was recently presented is sufficient to classify GRAM tokens as securities.
Employees' use of terms such as "sell gram" is a clear bond for being financial notes.
Generally, even if the company hand over bank records to the SEC. I believe that the records are severely incomplete. 

[Kemarit]

New documents filed by SEC in New York with additional details, stating the GRAM is indeed a security token. Even citing Shyam Parekh, a Telegram employee who told an accountant that "that the unnamed investor has the right to 72,835,916.68 Gram tokens". A bit messy to be honest, but let's see how Telegram will respond with all the allegations here.

I am sure that the outcome of this case will have bigger and far-reaching repercussions to the whole cryptocurrency industry as this can be the basis of future judiciary decisions on defining whether a token can be security or not. Telegram has the best opportunity to present all the legal arguments before the court that SEC is wrong on its conclusion that GRAM is a security token and therefore Telegram made legal mistakes in introducing such a digital asset to the public. Honestly, however, I am seeing that eventually the two sides on this legal maneuvering will be settling on a compromise.

Of course, another legal precedence here in the case of SEC vs Telegram. SEC is very clear as to what they define as "security" and pretty obvious that Telegram had made a lot of mistakes and now they are going to pay for it, but either fighting it out in a court case or simply admit there mistakes here and move forward. The evidence is well iron out by SEC here, I don't know how Telegram can legally maneuver here.

[bgaf]

So if SEC insist pushing that grams are security tokens but the Gram stipulated on their platform that their tokens served as a utility on their telegram network then they are lying to us? Then if that's the case they arent allowed to list it on major exchanges such as liquid and okex since there are none regulations yet set for security tokens that allowed them to formally listed on market. I know some security tokens but their provisions arent tight unlike this one.

The results of the filed case might not favor gram if such accusation is proven and discussed by authority. I am looking forward what action gram will take on this matter.

[Harlot]

The problem here is even if Grams have been launched in their TON network I don't see Grams as a mode of payment in any where in the app, making me suspicious of their real purpose for Telegram, the absence of usage for it being a cryptocurrency as a payment only means that it's only function is as a security token which has direct ties with their company. I'm still at a lost though if their token has other functions for a security token such as paying dividends for their holders which I haven't seen an article pointing about that. The document OP provided hasn't even directly classified Grams as some kind of security token but merely an illegal public offering which can be both violated by STOs and also IPOs.

[Kemarit]

So if SEC insist pushing that grams are security tokens but the Gram stipulated on their platform that their tokens served as a utility on their telegram network then they are lying to us? Then if that's the case they arent allowed to list it on major exchanges such as liquid and okex since there are none regulations yet set for security tokens that allowed them to formally listed on market. I know some security tokens but their provisions arent tight unlike this one.

That's why we have this court case now. It's there word against SEC and only litigation like this will tell us who's lying or not.

The results of the filed case might not favor gram if such accusation is proven and discussed by authority. I am looking forward what action gram will take on this matter.

Then they have to counter SEC, but from the looks of it, seems that Telegram is really on the hot water here. The ball is really on their court to prove that they are not a security token.

[Baofeng]

Quick update, SEC finds Gram as securities under the Howey Test.

The Court finds that the SEC has shown a substantial likelihood of success in proving that  the contracts and understandings at issue, including the sale of 2.9 billion Grams to 175 purchasers in exchange for $1.7 billion, are part of a larger scheme to distribute those Grams into  a  secondary  public  market,  which  would  be  supported  by  Telegram’s   ongoing  efforts.     Considering the economic realities under the Howey test, the Court finds that, in the context of that scheme, the resale of Grams into the secondary public market would be an integral part of the sale of securities without a required registration statement.

https://s3.cointelegraph.com/storage/uploads/view/c527a1e90d0e61f7470ee7ffca156e03.pdf?_ga=2.254326924.567671256.1584965776-579546957.1543762188

[TravelMug]

^^ Obviously, this is bound to happened, Telegram will lose its battle against SEC here.

Do they even think that they can get away with it? Although they are not based on US, but offering it to US securities will likely get them the attention from SEC and this is what occurred here. They failed the Howey Test, so I don't know how they will keep on fighting this one.

[malevolent]

What can the SEC or US courts under these circumstances? Can they force US companies such as Amazon (AWS) and Google (GCP) to stop doing business with Telegram which pays for their services?

[Theb]

^^ Obviously, this is bound to happened, Telegram will lose its battle against SEC here.

Do they even think that they can get away with it? Although they are not based on US, but offering it to US securities will likely get them the attention from SEC and this is what occurred here. They failed the Howey Test, so I don't know how they will keep on fighting this one.

Any Telegram user will obviously see that Grams ain't a payment method inside the app. So if SEC asked to have some Telegram users in front of the court they might even know what Grams are or what are there use in the Telegram app. They even admitted it in one of their written reports that they have sold grams in order to fund and support their ongoing operations with the Telegram network and nothing about it being a payment method in the app. The only question is what will really happen to their ICO since now it is labelled as a security I know their first buyers would be voided since there is a different procedure for STOs compared to normal ICOs.

[Baofeng]

What can the SEC or US courts under these circumstances? Can they force US companies such as Amazon (AWS) and Google (GCP) to stop doing business with Telegram which pays for their services?

Based on this article: https://www.theblockcrypto.com/post/59978/telegram-token-investors-are-now-ready-to-take-refund-offer-report

Another potential option could be the removal of American investors from the project, according to Barinsky, but "this may be followed by lawsuits from other investors."

@Theb, again quoting on that article, the launch could be postponed because they needed to work on another set of paper works. So it's pretty much mess up everything on their end.

Barinsky told TASS that the team of Durov could now register a transaction, recognizing that gram is a security. "To conduct an IPO, but in this case, the launch of the project will be postponed for another period, companies usually prepare for this for at least a year," he said, adding that it was "practically impossible" to do this before April 30, 2020.

[Harlot]

Given the growth of Telegrams, they will be faster in the top. Moreover, after the introduction of their own cryptocurrency, they break ahead with a huge margin!

If you have been reading their court ruling right now you'll see that they may not even have the chance to launch their crypto because the SEC have found or labelled their crypto as a security token rather than a utility token which in this case they have offered it illegally since the court ruled in favor the the SEC's finding. Now they are facing a dilemma about how they will still issue it to non-us investors since it is part of GRAM being labelled as a security token and with that it also applies a ban to non-US investors, the Non-US investors would only receive their GRAMS if they won't resell them to the US market which will be a hard thing to do especially if there are no other international exchange around who will allow the exchange of GRAMS.

[Mulann2]

They can at list start thinking a better strategy to make refunds to all investors since this is already looking like a dead end, once the court already ruled in favour of the sec, and term the token as security rather than utility that already does it, they already made the mistake of not be clear with their tokens in the first place.

[btc_angela]

They can at list start thinking a better strategy to make refunds to all investors since this is already looking like a dead end, once the court already ruled in favour of the sec, and term the token as security rather than utility that already does it, they already made the mistake of not be clear with their tokens in the first place.

Of course, after the SEC ruling, Telegram has no options but to give a refund to their investors otherwise they might get sued as well and it won't look on their name and as business entity. And it also seems to be that they have deceived their US investors by not telling that they are indeed a security token. So now the ball is on their court and the only option for them is to really comply with the decision.

[buwaytress]

Of course, after the SEC ruling, Telegram has no options but to give a refund to their investors otherwise they might get sued as well and it won't look on their name and as business entity. And it also seems to be that they have deceived their US investors by not telling that they are indeed a security token. So now the ball is on their court and the only option for them is to really comply with the decision.

You bet the funds have already been used up, if not for direct operations, then for litigation costs. Does anyone know if the crypto raised was stored as crypto (in original currency of raise) or if it was liquidated for fixed fiat amount? I keep seeing numbers floating around in fiat.

Also, I think investors who say they're deceived are being slightly irresponsible. You know it's a security just by looking at the token. Tokens don't change what they do overnight. Neither do definitions.

[Harlot]

You bet the funds have already been used up, if not for direct operations, then for litigation costs. Does anyone know if the crypto raised was stored as crypto (in original currency of raise) or if it was liquidated for fixed fiat amount? I keep seeing numbers floating around in fiat.

Also, I think investors who say they're deceived are being slightly irresponsible. You know it's a security just by looking at the token. Tokens don't change what they do overnight. Neither do definitions.

They most certainly have used some of it since the Gram sale happened last two years ago but I don't believe that they have depleted that 1.7 billion dollars this easily especially if the lawsuit against them was filed in October of 2019. With them running in donations I believe that they still have the capacity to pay the 175 purchasers back aside from that Pavel Durov is also a billionaire in terms of his net worth after all. I do agree with you that the investors here are irresponsible but they have no play regarding the the emergency action filed against them, it was all SEC's doing and all the witch hunt they are doing in the crypto industry.

[gentlemand]

It's toast. Telegram have announced that they have thrown in the towel - https://techcrunch.com/2020/05/12/telegram-abandons-its-ton-blockchain-platform/

It looks like they're pinning its demise entirely on the legal meddling they experienced from the US.

[Baofeng]

It's toast. Telegram have announced that they have thrown in the towel - https://techcrunch.com/2020/05/12/telegram-abandons-its-ton-blockchain-platform/

It looks like they're pinning its demise entirely on the legal meddling they experienced from the US.

I'll go straight on the source:

For the last 2,5 years some of our best engineers have been working on a next-generation blockchain platform called TON and a cryptocurrency we were going to name Gram. TON was designed to share the principles of decentralization pioneered by Bitcoin and Ethereum, but to be vastly superior to them in speed and scalability.

We were very proud with the result – the technology we created allowed for an open, free, decentralized exchange of value and ideas. When integrated with Telegram, TON had the potential to revolutionize how people store and transfer funds and information.

Unfortunately, a US court stopped TON from happening. How? Imagine that several people put their money together to build a gold mine – and to later split the gold that comes out of it. Then a judge comes and tells the mine builders: "Many people invested in the gold mine because they were looking for profits. And they didn't want that gold for themselves, they wanted to sell it to other people. Because of this, you are not allowed to give them the gold."

If this doesn't make sense to you, you are not alone – but this is exactly what happened with TON (the mine), its investors, and Grams (the gold). A judge used this reasoning to rule that people should not be allowed to buy or sell Grams like they can buy or sell Bitcoins.

Perhaps even more paradoxically, the US court declared that Grams couldn't be distributed not only in the United States, but globally. Why? Because, it said, a US citizen might find some way of accessing the TON platform after it launched. So, to prevent this, Grams shouldn’t be allowed to be distributed anywhere in the world – even if every other country on the planet seemed to be perfectly fine with TON.

This court decision implies that other countries don’t have the sovereignty to decide what is good and what is bad for their own citizens. If the US suddenly decided to ban coffee and demanded coffee shops in Italy be closed because some American might go there – we doubt anyone would agree.

And yet, despite that, we have made the difficult decision not to proceed with TON.

Sadly, the US judge is right about one thing: we, the people outside the US, can vote for our presidents and elect our parliaments, but we are still dependent on the United States when it comes to finance and technology (luckily not coffee). The US can use its control over the dollar and the global financial system to shut down any bank or bank account in the world. It can use its control over Apple and Google to remove apps from the App Store and Google Play. So yes, it is true that other countries do not have full sovereignty over what to allow on their territory. Unfortunately, we – the 96% of the world’s population living elsewhere – are dependent on decision makers elected by the 4% living in the US.

This may change in the future. But today, we are in a vicious circle: you can’t bring more balance to an overly centralized world exactly because it’s so centralized. We did try though. We're leaving it to the the next generations of entrepreneurs and developers to pick up the banner and learn from our mistakes.

I am writing this post to officially announce that Telegram’s active involvement with TON is over. You may see – or may have already seen – sites using my name or the Telegram brand or the "TON" abbreviation to promote their projects. Don’t trust them with your money or data. No present or past member of our team is involved with any of these projects. While networks based on the technology we built for TON may appear, we won’t have any affiliation with them and are unlikely to ever support them in any way. So be careful, and don’t let anyone mislead you.

I want to conclude this post by wishing luck to all those striving for decentralization, balance and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope that you succeed where we have failed.

https://telegra.ph/What-Was-TON-And-Why-It-Is-Over-05-12

One thing though, it looks like they spin everything to look likes they are the victim here and blame everyone, including the system but themselves.