The Securities and Exchange Commission (SEC) scored another victory in its battle with Telegram over the launch of its TON blockchain on Tuesday when a federal judge blocked its ‘Gram’ tokens from distribution. Telegram was accused of breaking investor protection laws when it ran its $1.7 billion ICO in 2018, arguing that it was exempt from securities laws because its investors were “sophisticated venture capitalists”. This didn’t sway the judge, who allowed the SEC to halt the distribution of the tokens while the legal situation plays out.
Five Month Battle
The SEC has been at war with Telegram over the legality of its Gram tokens since October 2019 when it issued emergency action to halt the distribution of the tokens pending full legal action against the messaging service. This left Telegram with little choice but to delay the launch of TON, an action that preceded five months of back and forth between themselves and the SEC.
In January, Telegram released an update that saw them try to compare Grams to commodities and included a very pointed reminder that the purchase of Gram tokens wasn’t intended to help investors “get rich”.
This act, which smacked of being too little too late, didn’t fool the SEC, who accused Telegram of avoiding the “economic truth” of their plans for Grams tokens, stating that Grams tokens held “no intrinsic value” unlike traditional commodities like “gold, comic books, and Krispy Kreme donuts”.
Judge Rules That Grams are Speculative Asset
In Tuesday’s ruling, Judge Castel stated that Gram tokens were without doubt a speculative asset, with individual success dependent upon allowing investors to resell them to the public. The injunction puts a halt to the distribution process while the litigation plays out, although the judge refused to conclusively rule for the SEC, which the agency had requested.