Come the middle of October, however, the SEC had intervened, obtaining a temporary restraining order against the company. The agency said Telegram didn’t register the offering with its office, and since it sees Grams as securities, it accused the company of violating the Securities Act of 1933. Then, in March, the US District Court for the Southern District of New York issued a preliminary injunction barring the delivery of Grams. And now the SEC has issued its final judgement.
“New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws,” said Kristina Littman, chief of the SEC enforcement division’s cyber unit. “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.” Telegram, meanwhile, accepted the penalty without admitting or denying any wrongdoing.
It’s not clear yet whether Telegram will revisit its Gram initiative in the future — if it does it will certainly do so under the watchful eye of the SEC — but the episode is illustrative of the wider problems companies face in getting cryptocurrency off the ground. Messaging service Kik was also ruled to have run its “Kin” token sale without proper regard for securities laws, while Facebook’s currency Libra has faced intense scrutiny from officials, leading to ongoing delays in launch.