In a recent court filing, Telegram refuted claims made by the SEC over its Gram token. The SEC had earlier stated that the Gram token was a security, which led to the abrupt halt of the issuance of Gram tokens. However, it would appear that Telegram was not happy with the decision in light of their recent court filing. In their court filing, the social media company wants the allegations made by the SEC to be dismissed. It argues that the Gram tokens are not securities.
What the Court Filing Claims
In court documents, Telegram claims that the allegations made by the SEC are meritless. They further claim that their private placement to accredited investors took place after getting valid exemptions to being registered as a securities offering under federal law. They also say that the Gram tokens will not operate as securities once they are launched on the TON blockchain.
Telegram alleges that the SEC has engaged in improper conduct in this new legal area and failed to provide clear guidelines of its views as to what constitutes a violation of federal laws. They claim that the SEC stance is an ad hoc legal position, which has indirect contrast to legal precedent. Besides that, Telegram claims that the position taken by the SEC contradicts views expressed by high-ranking SEC officials.
In the court filing, Telegram claimed they had engaged with the SEC voluntarily and had requested for guidance on how to avoid breaking federal laws related to securities. However, court documents claim the SEC did not offer them any guidance before they undertook their enforcement action.
The Genesis of the Lawsuit
In October, Telegram agreed to halt the sale of its Gram tokens due to actions undertaken by the SEC. At the time, it said that it the pause would continue until the courts had made a determination on the issue, according to court documents.
Initially, Telegram had announced that it would deliver its Gram tokens starting on October 31. However, the SEC was granted an emergency restraining order in the middle of October, which put the sale of the Gram tokens on hold.
The SEC has been quite busy in the crypto space. It has managed to secure various court orders putting on hold various token sales since they did not comply with Federal securities laws. A while back, it managed to stop a planned token sale by the Kik messaging app. As a result, the company was forced to halt all its operations as it reorganized itself.
Thus far, the law is still quite murky when it comes to what is defined as a securities sale during token sales. However, the fact that crypto has been associated with fraud and criminal activity has forced the SEC to take a harsh stance when it comes to token sales resembling securities offerings.
Image Source: Shutterstock