SEC Insists Grams Are Securities — TON Launch Won’t Change This
Following Telegram’s counterclaim, the SEC insisted that the firm has violated securities laws, asking the court to grant a preliminary injunction.
The United States Securities and Exchange Commission (SEC) has responded to Telegram’s counterclaim, insisting that Grams are securities.
Preventing Telegram from further violation
Following Telegram’s counterclaim on Oct. 16, where the firm argued that its native crypto is not a security and the preliminary injunction should be denied, the SEC has responded with a new filing in the U.S. District Court for the Southern District of New York on Oct. 17.
In the document, the regulator not only insists that Telegram has actually violated the U.S. securities laws but also argues that a preliminary injunction should be granted to prevent Telegram from further violation, stressing that the company is likely to violate the law again.
The SEC outlined that Telegram’s proposal to deny the injunction will allow them to continue to engage in violative conduct after five months, and put the burden on the regulator to seek another temporary restraining order (TRO) from the court.
The securities’ regulator states that it is an extraordinary non-justified request that would constitute a waste of judicial and public resources and thus should be denied.
According to a TRO filed on Oct. 11, Telegram should be at a court hearing in New York on Oct. 24.
Grams’ status after TON launch doesn’t matter
In the filing, the SEC reiterated that Telegram has violated the securities laws by selling Grams, which are “securities” under the Securities Act, to certain investors, including buyers in the U.S., without any applicable exemption from registration.
The regulator then refuted Telegram’s claim that Grams will merely be a currency or commodity after the launch of the Telegram Open Network (TON), arguing:
“Defendants’ Opposition to this showing rests entirely on the conclusory allegation that ‘Grams will merely be a currency or commodity’ and therefore not a security ‘once the TON Blockchain launches.’ [...] whatever Grams were in 2018 or what they will be whenever Defendants decide to distribute them, Telegram’s mere assertion that Grams ‘will ... be’ a ‘currency’ does nothing to cure the prior violation of law.”
Yesterday, Cointelegraph published a detailed report on Telegram’s case, providing key events and issues around the TON network and Grams.