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The U.S. Securities and Exchange Commission has sued the encrypted instant messaging and voice app; Telegram for allegedly breaking federal laws in its $1.7 billion digital token offering.

On the same token, the United States securities regulator announced on Friday it obtained a temporary restraining order against telegram and its subsidiary, TON Issuer Inc. however, Telegram had promised to commence on token distribution by October 31.



“Our emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold,” noted Stephanie Avakian, co-director of the SEC’s enforcement division, in a statement.

In addition, Telegram raised $1.7 billion from the first 171 purchasers of the Gram token. The company allegedly used those funds to “capitalize its business and finance the creation of its blockchain” (the “TON Blockchain”).

Furthermore, the SEC claims that $424.5 million of sales proceeds are from American investors and the company is about to sell more to the Americans. According to the agency, this violates the registration requirements of the Securities Act of 1933. It entitles them to immediate injunctive relief, expedited discovery, disgorgement of ill-gotten gain + interest; an Order stopping them from selling or distributing more Grams, and a civil money penalty.

Why the lawsuit is in a federal court

In fact, the lawsuit was filed in a federal court instead of an administrative proceeding before the SEC itself. As per the court order prepared by SEC, the primary reason for this is because, Telegram refused to accept service of a subpoena from the SEC. due to this, the SEC went to seek quick and emergency relief from a federal court.

In conclusion, Telegram was optimistic Grams would become a new way for people to make payments and money transfers. This is a similar vision as shared by the embattled Facebook Libra. This lawsuit comes at a time when five companies pulled out of the Libra Association. The project has faced immense scrutiny from lawmakers and regulators in the US and Europe.