The news broke yesterday that the U.S. Securities and Exchange Commission has temporarily stopped selling Telegram's TON cryptocurrency token. According to the documents, the reasoning of the second is that the sale of tokens is not recorded and does not respect the rules. Let's look at the differences between this episode and what happened lately with eos.
Telegram’s Token Sale Halted
Back in January 2018, Telegram raised a substantial amount of capital – over a billion dollars worth – to develop its own blockchain, dubbed the Telegram Open Network. As CryptoPotato reported, the company was supposed to launch its cryptocurrency wallet in either October or November of this year.
However, it appears that Telegram’s plans may be for naught, as the SEC has stepped in, obtaining a restraining order against Telegram and the Telegram Open Network. According to an official release, the commission found that the cryptocurrency sold during last year's sale was made unlawfully.
Stephanie Avakian, Co-Director of the SEC Enforcement Division, remarked:
Our emergency response today is to prevent Telegram from flooding U.S. markets with digital chips that we claim to have been sold illegally. We allege that the defendants failed to provide investors with information about the commercial activities of grams and telegrams, the financial situation, the risk factors and the management that securities legislation requires.
I put in a steven peikin, another deputy director of the commission, who said the telegram sought to gain the benefits of a public offer without complying with existing regulations.
Just last week, the SEC slapped EOS with a $24 million fine for conducting an unregistered ICO which raised upwards of $4 billion.
What's the difference with the eos case?
Following the SEC action against EOS, CryptoPotato spoke to Tomer Ravid, CEO at BloxTax, who explained at length the merits of the charge and why the amount was insignificant given the amount of capital that Block.We had managed to raise.
Following the telegram, we reconnected with Ravid, and he explained how the two situations differed. According to him, the main difference is that eos had little or no business activity prior to its initial parts offering. As a result, there was not much to disclose. On the other hand, the telegram is a real company that has a real activity, so there's an expectation that it will need to disclose a lot of information. He also said that the sec seems to believe that there may have been fraud activity, which is something that was not part of the case against eos.
Additionally, Ravid noted a similarity with the claims that the SEC made against Kik. He said that there had been a lack of disclosure and a failure to provide information that a reasonable investor would need to have in order to formulate an investment decision. This was also alleged in the case of Kik, which provided the basis for the fraud complaint against the company.
Even though we do not yet know how the situation will unfold, it’s clear that the sec is stepping up and taking serious actions against companies that seek to access the us capital market through an initial coin offering or other kinds of token sales.