Telegram Open Network (TON) has sent a letter to its investors to reassure them that the company is taking steps to resolve the situation with the US Securities and Exchange Commission (SEC).
The letter, which has been shared with several news site, stated that Telegram had been consistently trying to get feedback about the TON blockchain for the past 18 months prior to its recent announcement.
The SEC announced in its Oct.11 press release that Telegram and its upcoming GRM token was considered an unregistered digital token offering. The Commission had since filed a restraining order against Telegram and TON in a complaint that’s been registered at Manhattan’s federal district court.
According to the SEC, the GRM token sales were not registered. And since the Securities Act of 1933 mandates all securities to be registered with the SEC, it has been deemed “unlawful.”
A court hearing has been set for Oct. 24 in New York.
Telegram claimed in its letter to investors that it disagreed with the Commission’s legal position and that it was surprised and disappointed it had chosen to file a lawsuit. The company also said it’s still evaluating the best way to resolve the situation so that the interests of all parties are protected.
One option Telegram is apparently looking into is to delay their cryptocurrency’s planned October launch date.
The SEC’s decision has raised questions, especially as several high-profile investors are involved. Nathanial Popper of the NY Times tweeted as much when he wondered about the SEC’s move to stop Telegram’s project. The reporter also noted that major capital firms like Benchmark, Sequoia, and others had sunk about $1.7 billion on the project because they believed that it will pass regulations.
Telegram had reportedly submitted a Form D filing with a 506(c) exemption. It would mean the security (which is the GRM tokens, in this case) is qualified for an exemption if it’s exclusively sold to accredited investors.
However, the SEC ruled that while the GRM tokens would only be sold to select investors, they would be able to resell them, and this constitutes a violation of Rule 506 (c). The SEC stated that once the resales happen, Telegram would have completed its unregistered ICO and billions of GRM tokens would be traded on platforms to a diverse group of investors.
The SEC’s decision to file a “preliminary injunction” was reportedly a preemptive move. Instead of waiting for the 506 exemption to be violated, it would stop the tokens from reaching the unaccredited investors.