- Over 2.9 billion tokens have been sold by the firm to 172 entities worldwide.
- The SEC advises against buying unregulated stocks and tokens because they pose major financial risks to American investors.
- On September 20, the agency imposed a $24 million fine on another company, Block One, that specializes in developing blockchain products.
The U.S. Securities and Exchange Commission has asked the Telegram Group to halt the sale of its Gram cryptocurrency. According to a press release published by the agency, a temporary restraining order has been obtained to stop the firm and its subsidiaries from going ahead with the event.
Telegram reportedly failed to register its initial token offering in contravention of state laws. The social media company has so far raised over $1.7 billion in investments through an Initial Coin Offering launched in 2018.
Over 2.9 billion tokens have been sold by the firm to 172 entities worldwide. Thirty nine of the buyers were from the United States. The company had promised to deliver the tokens to investors by October 31, 2019 after the Gram cryptocurrency network is launched.
Access to the tokens allows investors to buy and sell them in markets worldwide, including the United States. The SEC, however, classifies this category of speculative instruments as securities and so issuing companies are required to abide by set federal statutes.
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Telegram raised most of the project capital between January and April last year, making the undertaking the biggest of its kind at the time. The SEC advises against buying unregulated stocks and tokens because they pose major financial risks to American investors.
According to Stephanie Avakian, the Co-Director of the SEC’s Division of Enforcement, Telegram has failed to provide investors with important details about the project, including the financial condition of the company, the risks involved, as well as regulatory compliance efforts.
On September 20, the agency imposed a $24 million fine on another company, Block One, that specializes in developing blockchain products. The enterprise is reported to have carried out several Initial Coin Offerings that raised over a billion dollars in funding without the SEC’s approval.
In April, the SEC slapped Longfin Corp and its head Venkata Meenavalli with a $6.8 million fine for falsifying company information that would enable it to qualify for a Nasdaq listing. The company fallaciously claimed that it was based in the United States and was found to have given away over 400,000 free shares to insiders and some of its affiliates in a bid to inflate the number of shareholders.
The SEC considers cryptocurrencies and ICOs to be high-risk investments. This is because the industry at large is highly turbulent, unregulated, and susceptible to manipulation when compared to regulated capital markets.
The immutable and borderless nature of cryptocurrency networks also means that it’s harder to recover stolen or lost funds. Additionally, launching criminal proceedings against companies and individuals that are suspected of defrauding or manipulating investors, especially if they are located in countries where there are non-existent crypto regulations, is a complex matter.