The entities behind Telegram and its $1.7 billion ICO were hit by an emergency action and restraining order by the SEC for failing to register its Gram token as a security.

The U.S. Securities Exchange Commission is alleging that the companies behind Telegram and its initial coin offering have been conducting an unregistered securities offering. Telegram first began raising capital in January 2018 to build their own blockchain, the “Telegram Open Network,” also known as the “TON” blockchain.

To date, Telegram sold 2.9 billion Gram tokens to 171 purchasers worldwide, with more than a third of those tokens, worth some $590 million, going to 39 U.S. investors, according to the release.

Telegram promised to deliver the Gram tokens on the launch of its blockchain, no later than Oct. 31, 2019. After which Telegram would “sell billions of Grams into U.S. markets.”  Reporting from TechCrunch reaffirmed that Telegram was planning to sell its tokens to retail investors as early as October.

The complaint made by the SEC alleges that the entities behind Telegram failed to register their offer and sale of the Gram token, “which are securities, in violation of the registration provisions of the Securities Act of 1933.”

Steven Peikin, co-director of the SEC’s division of enforcement had this to say about the action:

“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 obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.”

The complaint was formally filed in New York’s federal district court of Manhattan and charges the entities behind Telegram with violating several provisions of the U.S. Securities Act. Consequently, the SEC is seeking certain emergency relief, permanent injunctions, disgorgement, and civil penalties against the actors involved.

The post Telegram hit by SEC emergency action for its $1.7 billion token offering appeared first on CryptoSlate.

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