Telegram cannot sell Grams outside of the U.S. either, even after the company argued that the tokens wouldn’t reach American investors. New York Judge, however, found those claims insufficient as Telegram couldn’t adequately address them.
Telegram’s Issues Spiral On
As Cryptopotato reported last week, U.S. District Court officially halted the Gram tokens sale following a lawsuit filed by the Securities and Exchange Commission (SEC).
Telegram, the firm behind the future blockchain-based project, asked the court to clarify the SEC’s exact requirements. More importantly, if this ban applies to non-American Gram investors as well. The company promised that they will take the necessary measures to ensure that reselling the tokens to U.S. citizens does not happen.
Now, the prolonged battle between Telegram and U.S. authorities took another adverse turn for the popular encrypted messaging application. U.S. District Judge P. Kevin Castel, of the Southern District of New York, denied Telegram’s claim, as he found two vital flaws:
“First, Telegram does not explain how the imposition of these new restrictions would be lawful modifications of the Gram Purchase Agreements entered into in 2018. Second, and more fundamentally, the TON Blockchain was designed and is intended to grant anonymity to those who purchase or sell Grams.
Therefore, any restrictions as to whom a foreign Initial Purchaser could resell Grams would be of doubtful real-world enforceability.”
The judge added that American investors could decide to “simply disclaim having a U.S.-based address.”
TON’s Security Status Is The Real Problem
Back in January this year, SEC revealed internal correspondence suggesting that Telegram knew the upcoming Gram token will be a security. Judge Castel outlined once again that this exact status is causing the problems, no matter if the token sale takes place outside or inside the U.S.:
“Transactions involving securities that are not traded on a domestic exchange are domestic if irrevocable liability is incurred or title passes within the United States.
Focusing upon the Initial Purchasers and their Gram Purchase Agreements misses one of the central points of the Court’s Opinion and Order. Specifically, that the “security” was neither the Gram Purchase Agreement nor the Gram but the entire scheme that comprised the Gram Purchase Agreements and the accompanying understandings and undertakings made by Telegram, including the expectation and intention that the Initial Purchasers would distribute Grams into a secondary public Market.”