In the ongoing enforcement action SEC v. Telegram Group, Inc. and TON Issuer, Inc., SDNY Judge P. Kevin Castel has granted the SEC’s motion to preliminarily enjoin Telegram and TON Issuer (collectively, Telegram) from distributing its cryptocurrency, Grams, to 175 sophisticated entities and high-net-worth individuals. The court concluded that the SEC is highly likely to succeed on its claim that Grams are securities subject to US securities laws and that the sale of Grams was a securities offering which was not exempt from registration requirements in the US. For now, Telegram cannot distribute Grams to those who purchased the digital assets for a total price of USD1.7 billion. While Telegram has already appealed the injunction, the prohibition on distribution remains in place for now.
Given the court’s national prestige and the opinion’s in-depth analysis on the application to digital assets of the investment contract test laid out in the Supreme Court’s SEC v. W.J. Howey opinion, the decision is likely to significantly impact digital asset sales in the US.
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