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- On March 24, the Southern District of New York said that SEC has demonstrated a plausible case that explains the messaging platform Telegram has sold unauthorized securities.
- As per the Judge, the Court finds that SEC has shown evidence of contracts and understandings at issue.
- The judge differentiated between the gram tokens when they were initially launched and the securities that Telegram’s customer allegedly bought during the ICO in his governing.
On March 24, the Southern District of New York said that SEC has demonstrated a plausible case that explains the messaging platform Telegram has sold unauthorized securities.
The Court’s findings
The regulator sued Telegram in October 2019, alleging that the company raised nearly $2 billion in a 2018 token sale and thus violated the federal law.
As per the Judge, the Court finds that SEC has shown evidence of contracts and understandings at issue. This includes the sale of 2.9 billion gram tokens to 175 purchasers in exchange for $1.7 billion.
These are the part of a larger scheme to distribute those grams into a secondary public market. This would be supported by the Telegram’s ongoing efforts.
The judge further pointed out that those $1.7 billion earned from the sale. As per the judge’s opinion, Telegram created a project to raise the amount the initial purchaser would be willing to pay for tokens through building a framework to increase the profit of the purchaser upon resale.
The Howey test
Through the Howey test, the Court finds the economic realities which notify in the context of that scheme the resale of Grams into the secondary public market would be a vital part of the sale of securities without an essential authorized statement.
In the Howey analysis, the evaluation of securities named after the Supreme Court case. The judge stated penned that purchasers would expect a profit, however, the Telegram claimed that it will not be the controlling power behind further development of Telegram Open Network Blockchain (TON).
The judge differentiated between the gram tokens when they were initially launched and the securities that Telegram’s customer allegedly bought during the ICO in his governing.
In this case, the Court discards Telegram’s depiction of the claimed security. The judge previously told attorneys for both parties not to hold off on labels during a February hearing of the case.
Moreover, the aftermath of the aforementioned case was that the judge ordered Telegram to refrain from issuing its gram cryptocurrency next month as per the plan, and granted the request of the Securities and Exchange Commission (SEC).
