With the ongoing court battle between the US Securities and Exchange Commission (SEC) and Telegram, the court has ordered a halt to the Gram token distribution.
According to a court filing on March 24, the court has approved a preliminary injunction requested by the SEC.
“The Court finds that the SEC has shown a substantial likelihood of success in proving that the contracts and understandings at issue, including the sale of 2.9 billion Grams to 175 purchasers in exchange for $1.7 billion, are part of a larger scheme to distribute those Grams into a secondary public market, which would be supported by Telegram’s ongoing efforts,” the court filing stated.
“Considering the economic realities under the Howey test, the Court finds that, in the context of that scheme, the resale of Grams into the secondary public market would be an integral part of the sale of securities without a required registration statement.”
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Largest token sale to date
Telegram raised $2 billion from selling its digital currency, making it the largest token sale event to date. Though the company was scheduled to distribute its tokens to its investors by the end of last October, the SEC slapped a lawsuit against it for violation of US securities law.
The injunction was approved as the messaging giant is trying to put its tokens in the secondary market.
“Telegram’s sale of Grams to the Initial Purchasers, who will function as statutory underwriters, is the first step in an ongoing public distribution of securities and, as such, Telegram cannot receive the benefit of an exemption from the registration requirement under either section 4(a) or Rule 506(c),” the court stated.
“The Court also finds that the delivery of Grams to the Initial Purchasers, who would resell them into the public market, represents a near-certain risk of a future harm, namely the completion of a public distribution of a security without a registration statement. An injunction, prohibiting the delivery of Grams to the Initial Purchasers and thereby preventing the culmination of this ongoing violation, is appropriate and will be granted.”