SEC and Telegram clash over disclosure of investor information

Maria Nikolova

The regulator opposes Telegram’s request to seal information identifying certain investors whose roles stretched beyond mere investment.

The proceedings launched by the United States Securities and Exchange Commission (SEC) against Telegram Group Inc. and TON Issuer Inc. over alleged $1.7 billion unregistered digital token offering continue at the New York Southern District Court. The latest developments in this case focus on information disclosures, with the US regulator opposing an attempt by the defendants to seal certain investor information.

On February 14, 2020, the SEC lodged a Letter with the Court, responding to motions filed by defendants Telegram Group Inc. and TON Issuer Inc. and nine third-party investors to seal or redact portions of exhibits or documents that the parties have submitted to the Court in connection with their pending motions. In short, whereas the defendants are pushing for sealing of a heavy amount of information related to investors, the SEC insists that a certain part of this information should not be kept under seal as it is important for the case.

The SEC consents to sealing information identifying certain investors but not others whose roles stretched beyond mere investment, opposes sealing most of the business information at issue, and consents to sealing the financial records on certain conditions.

The regulator notes that Telegram has proposed redacting investor identifying information for all investors, including those who played a further role in Telegram’s offering, for example, by marketing Grams to others. Telegram has also proposed redacting identifying information for certain non-investor third parties who were otherwise involved in the offering or in the development of the TON Blockchain.

The SEC objects to redacting the names of any investors or any non-investor third parties who have engaged in additional activities, such as marketing and selling Grams or Gram interests or developing applications for the TON ecosystem (including those whose efforts were or are coordinated with Telegram).

According to the SEC, the communications and other actions of those investors or third parties are highly relevant to issues relating to the pending motions, including showing whether Grams are securities and whether Telegram’s offering may qualify for an exemption from registration under the Securities Act of 1933.

The SEC has also submitted at the Court a list containing 24 names of the investor and non-investor third parties whose conduct in the offering involved more than merely investing and summarizes their roles. The roles range from “involved in marketing and selling Grams interest” to “application development”.

The SEC argues in favor of disclosure. The regulator notes that none of those investors or third parties have moved to seal or redact their names or articulated any privacy interests—it is Telegram that seeks to protect their unarticulated “privacy” interests despite the fact that many of these entities have made public statements connecting them to Grams and Telegram. The identities of the third parties in the list should therefore not be redacted, the SEC says.

Let’s recall that, in a recently filed motion for summary judgment, the SEC argued that it is entitled to summary judgment as a matter of law on its claim that Telegram made unregistered offers and sales of securities.

Read this next

Digital Assets

Revolut receives FCA’s go-ahead to launch crypto trading

British fintech and banking firm Revolut has received a regulatory go-ahead to launch its cryptocurrency services in the UK.

Digital Assets

GBTC share is trading at 36% below bitcoin spot price

Grayscale Bitcoin Trust share has widened its discount relative to the underlying cryptocurrency held in the fund, the highest margin ever since its debut in 2013. Digital Currency Group’s flagship GBTC shares traded at a discount of 35.8% to net asset value (NAV) today.

Digital Assets

Crypto lender Nexo investigated by 8 US state regulators

State securities regulators in New York, California, Kentucky, Maryland, Oklahoma, South Carolina, Washington and Vermont are investigating crypto lender Nexo for allegedly failing to register its Earn Interest Product.

Metaverse Gaming NFT

Astar Network’s ad features 329 top brands to support Web3 in Japan

Blockchain innovation hub Astar Network is making strides in promoting the Web3 adoption worldwide. In yet another milestone, the smart contracts platform has run a national newspaper ad in Japan that set a new global record with participation from 329 blue-chip firms.

Digital Assets

Pyth Network welcomes onchain data from crypto market maker Auros

“By sharing our high-frequency trading data with a truly onchain decentralized network, we aim to foster innovation that will lead to better financial solutions for all participants.”

Digital Assets

Tokeny integrates Ownera to boost liquidity of tokenized assets

“The adoption of FinP2P will result in higher liquidity and better access to capital and assets by providing regulated firms with one secure point of connection to multiple digital asset networks across the globe.”

Digital Assets

BingX launches subsidy vouchers to cover user losses in copy trading

“With the introduction of copy trade subsidy vouchers, new users can easily try out trading strategies without incurring losses.”

Digital Assets

Talos expands sales team: Frank van Zegveld, Matt Houston, Hillary Conley

“The extensive leadership and industry expertise of these new hires will enable us to build long-lasting relationships as we continue to build out our global presence in EMEA and beyond.”

Executive Moves

FX and CFD broker Emporium Capital hires industry veteran Robert Woolfe as COO

His past experience within the FX and CFD industry includes top roles at Capital Index, London Capital Group, GKFX, ETX Capital, and IG.  “I’m delighted to be part of the Emporium Capital team and spearheading the brokerages global expansion plans”, he said about the appointment.