In a filing to the district court of the Southern District of latest York on Tuesday, Telegram broke down and refuted all the allegations made by the SEC in its case brought last month, barring some fundamentals like the character of the corporate and its team and uncontested details of its fundraise.
On Oct 11, the SEC secured an emergency restraining order against the Telegram Group and its subsidiary developing the TON blockchain network against their $1.7 billion sale of gram tokens. SEC Division of Enforcement co-director Stephanie Avakian said at the time that the emergency action was “intended to stop Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold.”
However, while sold, the gram tokens still aren’t yet issued or distributed to investors and weren’t to possess been until the launch of the TON blockchain. That had been scheduled for Oct. 31, but was delayed by the SEC case.
“[The SEC’s] claims are without merit as Telegram’s private placement to highly sophisticated, accredited investors was conducted pursuant to valid exemptions to registration under the federal securities laws and Grams won’t be securities once they are created at the time of launch of the TON Blockchain,” said Telegram within the latest filing.
In its announcement of the court action, another SEC Division of Enforcement co-director, Steven Peikin, said:
“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token. Telegram seeks to get the advantages of a public offering without complying with the long-established disclosure responsibilities designed to guard the investing public.”
Telegram takes issue with this stance within the filing too, saying that the SEC has “engaged in improper ‘regulation by enforcement’ during this nascent area of the law, did not provide clear guidance and fair notice of its views on what conduct constitutes a violation of the federal securities laws, and has now adopted a billboard hoc legal position that’s contrary to judicial precedent and therefore the publicly expressed views of its own high-ranking officials.”
Telegram further claimed that it had “voluntarily engaged” with the SEC seeking guidance to avoid breaking federal securities laws. Yet the SEC “failed to supply [guidance] before bringing this enforcement action.”
The company again stressed that its gram tokens haven’t yet been created, claiming that “if and once they do, they’re going to constitute a currency and/or commodity – not securities under the federal securities laws.”
Telegram conceded it didn’t file a registration statement with the SEC because “none was, is or are going to be required under the federal securities laws.”
As such the firm asked the district court to deny the SEC’s claim for relief and dismiss the claims against it “with prejudice and order such further relief because the Court deems just and proper.”
The matter won’t be decided until a minimum of Feb. 18–19, when subsequent hearing is to be held. The hearing had originally been slated for Oct. 24 but the date was moved forward to permit both parties time for discovery within the case. Telegram has agreed to delay launch of both the TON blockchain and therefore the token until then date.