SEC: Telegram Avoiding “Economic Truth” Over Grams

Reading Time: 2 minutes

The Securities and Exchange Commission (SEC) has accused Telegram of avoiding the “economic truth” that Grams tokens are securities in a recent filing. The filing, a reply memorandum of law, sees the agency trying to bolster its argument against the Russian messaging app creators who it accuses of running a sale of unregistered securities. It also pulls apart Telegram’s arguments, using an analogy featuring a well-known brand of donut to bring some humor to their reasoning.

SEC Accuses Telegram of Trying to Dance Around Regulations

Telegram had tried to argue that their token sale, which raised almost $2 billion in 2018, may have constituted a sale of securities, but that there will be a crucial difference in the type of token that will eventually be distributed, which the SEC summarizes in their filing:

Telegram argues in essence that this distinction somehow transforms Grams into a non-security and therefore that investors have no right to the type of key information typically found in registration statements.

The SEC calls this argument “a sleight of hand” and complains that the company is trying to “do a two-step” around securities laws, when it is clear, to them at least, that Telegram has been selling a security all along.

Grams Tokens are Not a Commodity Either

The SEC also cries foul over Telegram’s attempt to class Grams tokens as commodities, using a tongue-in-cheek analogy to explain how the value of each Gram is solely reliant on Telegram’s efforts to make their project work, rather than having an intrinsic value:

Grams are not commodities. Unlike gold, comic books, and Krispy Kreme donuts— commodities Telegram compares to Grams—Grams have no intrinsic value.

Whether ICO tokens are securities or not is a point that has been debated ever since the SEC filed its first such case, and will continue to be until a firm decision is made one way or the other on which cryptocurrencies constitute securities and which don’t – something that Kik founder Ted Livingston is hoping to achieve with his imminent court case against the agency.

However, even a blind donkey could see that trying to pass off Gram tokens as commodities is an absurd claim. Come on Telegram – we’re thankful for all the crypto groups you’ve given us, but seriously…you need to start helping yourself out here.