Telegram forced to stop its crypto token sale due to SEC emergency restraining order

Telegram is one of the most privacy-focused businesses out there and it is said to be competing against the likes of Facebook-owned WhatsApp and China’s Viber and WeChat. There were reports earlier regarding Telegram which showed that the service is being used by terrorists as well as underground agents to contact each other and communicate. This shows how much the service goes under the radar which is great for privacy but terrible for national security. While that storm has sailed, we have a new storm brewing up at Telegram and the target this time is its crypto token service called The Gram.

It is reported by The Verge that a restraining order has been handed out to Telegram which means that they have to halt their token sales immediately. In a statement regarding its decision, the SEC said that “Our emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold,” and adding that “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.”

However, the problem for Telegram is that they will have to return the money it raised if it fails to distribute all its token by October 31, 2019, which is a terrible situation because of the SEC’s restraining order. SEC adds that “We have repeatedly stated that issuers cannot avoid the federal securities laws just by labelling their product a cryptocurrency or a digital token,” and blaming the service while adding that “Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public”. It is known that Telegram raised $1.7 billion in early sales of the token which has raised red flag with the regulators and security researchers.