NY Court invites CFTC to voice its stance in proceedings against Telegram

Maria Nikolova

The CFTC is invited to express its views on matters concerning the SEC’s action against Telegram and TON Issuer.

The action launched by the United States Securities and Exchange Commission (SEC) against Telegram and TON Issuer continues at the New York Southern District Court, with another regulator set to become involved in the proceedings.

Earlier today, Judge P. Kevin Castel signed an order inviting the Commodities Futures Trading Commission (CFTC) to voice its opinion on the matters in this case.

The order, seen by FinanceFeeds, states:

“The Office of General Counsel of the United States Commodities Futures Trading Commission is respectfully invited to express its views on the issues presently before the Court in the above-captioned action in which its interests may be implicated. Leave is granted to file a written submission, which may take the form of a letter”.

The order does not specify which issues precisely require the CFTC’s intervention. Yet, one may suppose that the question of whether “Grams” are securities or not, is among the issues requiring the CFTC’s attention. This matter was at the core of the SEC’s motion for summary judgment against the defendants.

Telegram and TON Issuer allegedly conducted an unregistered, ongoing digital token offering which has raised more than $1.7 billion of investor funds.

According to the SEC’s complaint, Telegram Group and TON Issuer Inc. started 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. The companies 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 US purchasers.

Telegram promised to deliver the Grams to the initial purchasers upon the launch of its blockchain by no later than October 31, 2019, at which time the purchasers and Telegram will be able to sell billions of Grams into US markets.

The SEC’s complaint alleges that the companies failed to register their offers and sales of Grams, which are securities, thus violating of the registration provisions of the Securities Act of 1933.

The complaint charges both companies with violating the registration provisions of Sections 5(a) and 5(c) of the Securities Act. The regulator seeks certain emergency relief, as well as permanent injunctions, disgorgement with prejudgment interest, and civil penalties against the defendants.

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