A US federal court has ruled in favor of a temporary restraining order against Telegram, effectively blocking the company from issuing its Gram tokens. This is an extension of a temporary restraining order the SEC filed against Telegram back in 2018, which prevented it from issuing its tokens until the court decided whether or not they violated current securities laws.

The US Securities and Exchange Commission (SEC) has just scored a major win in its two-year-long legal battle with Telegram.

According to recently published court documents, a US federal court has now effectively blocked the issuance of Telegram’s Gram token, sold in a record-breaking $1.7 billion ICO in 2018.

On Mar. 24, US District Judge Kevin Castel issued a temporary restraining order against Telegram, saying that the SEC demonstrated a plausible cause that the tokens Telegram sold violated the U.S. securities law.

“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 said in the filing. 

The judge cited the Howey Test, a method created by the American Supreme Court in 1946 used to determine whether something constitutes a security or not. Judge Castel said that the resale of Telegram’s Gram tokens into the secondary public market would make the tokens securities.

As such, they would need to be registered with the SEC.

As the court deemed that Telegram knew and understood that the 175 investors who purchased the tokens wouldn’t use them as a store of value, the company will have a hard time winning the case against the SEC.

The latest ruling represents a pivotal point in the case—firstly, the injunction means that the SEC is one step ahead of Telegram. With this being the second temporary restraining order against the company, Telegram will have a hard time defending their position once the case continues.

Secondly, the purchase agreement in Telegram’s ICO states that if the Telegram Open Network (TON), the blockchain where Gram tokens will be issued, doesn’t launch before Apr. 30, investors are entitled to a refund. 

The judge has issued the injunction almost a month before the expected date due to the general quarantine in the US, giving Telegram ample time to appeal the decision and avoid refunding their investors.

However, with a significant amount of the $1.7 billion raised already spent, the latest ruling might be what stomps the company’s controversial ICO. 

The post Court Blocks Telegram’s Token Issuance for Violating Securities Law appeared first on Crypto Briefing.

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