The SEC continues to crack down on any token offerings or initial coin offerings which may violate securities laws. The latest victim in this crusade is Telegram Group Inc. Their TON tokens raised US$1.7bn in funding, although the SEC is now considered about this development. Given how these tokens would be distributed in the next few weeks, the time to intervene is right now.
The Successful TON Sale
Most people in the cryptocurrency world know all too well how Telegram Group Inc will create its own digital token. Its subsidiary, known as TON Issuer Inc, officially began to raise money in January of 2018 to finance the business model involving this token and its native blockchain. The Telegram Open Network is widely considered to be a great development, assuming it will deliver on all of the initial promises.
With over US$1.7bn raised during this token sale, it was a matter of time until the SEC decided to take a closer look. They have now done so in an official capacity. More specifically, they express concerns over this alleged unregistered digital token offering accessible by US investors. It is believed that 39 different US purchasers have been involved in the token sale to date. The tokens should be delivered prior to November 1, 2019, which means the distribution deadline has drawn very near.
Preventing the Token Issuance
In the official message posted on the website, the SEC claims they aim to “prevent Telegram from flooding the US markets with unlawful digital tokens”. In their opinion. Telegram Group Inc and TON Issuer Inc failed to provide investors with the correct information. There are also concerns regarding other securities laws violations referring to the financial condition and management of Telegram. A very harsh statement, although one that will be very difficult to refute.
It is a bit unclear why Telegram decided to skirt federal securities laws in the United States. Although TON is labeled as a digital token, that doesn’t make it exempt from these rules by any means A public offering without complying with guidelines and responsibilities is simply not done. If the SEC is successful in this appeal, they may seek permanent injunctions and civil penalties. That could put an immediate end to the TON token venture as a whole, as the entire project would be invalidated as a result.
What Happens Next?
For the time being, it remains to be seen what happens to this particular complaint. An emergency action usually leads to an outcome in a matter of weeks. The temporary restraining order against both Telegram Group Inc and TON Issuer Inc could tie up the US-based funds involved in this alleged unregistered digital token sale. That would mean nearly one-third of the TON offered to early investors will remain “locked up” for an extensive period of time.