Telegram responded to the United States securities regulator, arguing that Gram, the native cryptocurrency for the Telegram Open Network (TON), is not a security.
Telegram requests to deny SEC’s injunction
In an Oct. 16 filing, Telegram urged the United States District Court for the Southern District of New York to deny the U.S. Securities and Exchange Commission’s (SEC) request for a preliminary injunction.
Moreover, the firm asked the court to enter an order that maintains the status quo regarding the offer, sale or distribution of Grams.
The filing is released two days in advance of Telegram’s ordered deadline to release a counterclaim on Oct. 18, the firm noted in the document.
“Emergency” of SEC’s own making
In reference to the SEC’s recent emergency action against Telegram on Oct. 11, the filing document claims that ”the SEC’s instant application is an ‘emergency’ of its own making.”
Reiterating its previous claims, Telegram’s legal council wrote that the firm has been voluntarily engaged with the authority regarding both the TON blockchain and Grams for the past 18 months, but the authority has not provided any clear feedback on the matter. Specifically, Telegram stressed that the authority allegedly decided to do so because Telegram promised to reimburse its investors in case if TON does not launch by Oct. 31.
The filing reads:
“Despite the SEC knowing for 18 months that if the TON Blockchain did not launch by October 31, 2019, Telegram would be obligated under its agreements with private purchasers to return the funds it raised, the SEC (i) never requested that Telegram delay the launch of the TON Blockchain; (ii) never advised Telegram of its intention to seek injunctive relief; and (iii) waited until the eleventh hour to file an ex parte application to enjoin Telegram’s launch.”
Gram is “merely a currency or commodity”
In the document, Telegram pushed back the U.S. securities regulator by claiming that its Gram token is not a security. The firm emphasized that Telegram already treated the Private Placement as a securities offering pursuant to valid exemptions to registration under the Securities Act of 1933. Once the TON blockchain launches, the grams will merely be a currency or commodity like gold or silver, but not a security, the firm wrote.
Telegram is not an ICO
Telegram also considered the ambiguity of Gram’s connection with initial coin offering (ICO) products, stating that Telegram has never issued a security to the public through an ICO. Telegram explained that instead of doing an ICO-like product, the firm entered into private purchase agreements with a limited number of purchasers that provided the future payment of Gram currency. The firm wrote:
“Unlike other digital assets that were offered to the general public through so-called Initial Coin Offerings (“ICOs”), Telegram did not — and will never — offer any securities to the public through an ICO.”
While informing that court that Telegram has decided to delay the launch of the TON blockchain, the firm concluded that there is no need for the Court to enter a preliminary injunction in the filing.
As reported, in addition to declaring Gram token illegal, the SEC also issued a temporary restraining order on the issuance of Gram tokens, with a court hearing scheduled for Oct. 24.