By Sean Jackson

The U.S. Securities Exchange Commission has halted Gram, the initial coin offering, or ICO, of secure messaging app Telegram. Telegram stated that they would deliver the tokens to those who purchased them no later than October 31st of this year. The SEC is suggesting that the token offering was not registered properly as a security, and does not comply with the Securities Act of 1933.

On Friday the SEC filed an emergency action and obtained a temporary restraining order against Telegram after the messaging app company raised one point seven billion dollars from investors.

The SEC issued a statement where they outlined why they issued emergency action.

According to the SEC’s complaint, Telegram Group Inc. and its wholly-owned subsidiary TON Issuer Inc. began raising capital in January 2018 to finance the companies’ business, including the development of their own blockchain, the “Telegram Open Network” or “TON Blockchain,” as well as the mobile messaging application Telegram Messenger. Defendants sold approximately 2.9 billion digital tokens called “Grams” at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchaser.

Stephanie Avakian, Co-director of the SEC’s enforcement division spoke to the sale of tokens, stating,

Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold. We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.

Steve Peikin, another co-director with the enforcement division suggests that Telegram cannot bypass laws with a crypto,

We have repeatedly stated that issuers cannot avoid the federal securities laws by just labeling their product a cryptocurrency or a digital token. Telegram seeks to obtain the benefit of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.

Telegram has not issued any statements regarding the SEC actions.

U.S. Government Halts Telegram Cryptocurrency