Judge Halts Telegram Token Issuance in Injunction Requested by SEC
“The Court finds that the SEC has shown a substantial likelihood of success in proving that the contracts and understandings at issue, including the sale of 2.9 billion Grams to 175 purchasers in exchange for $1.7 billion, are part of a larger scheme to distribute those Grams into a secondary public market, which would be supported by Telegram’s ongoing efforts,” the judge wrote. "Considering the economic realities under the Howey test, the Court finds that, in the context of that scheme, the resale of Grams into the secondary public market would be an integral part of the sale of securities without a required registration statement," the judge wrote.
In his Howey analysis – the securities assessment named after a landmark Supreme Court case – the judge wrote that purchasers would expect a profit, and while Telegram may have claimed it would not be the guiding force behind further development of the Telegram Open Network (TON) blockchain, “as a matter of fact,” it would be. The judge did draw a distinction between the gram tokens when they eventually come into existence, and the securities Telegram’s customers allegedly bought during the initial coin offering (ICO) in his ruling.