Cryptocurrency’s bad news day continues to get worse as the U.S. Securities and Exchange Commission has said it has filed an emergency action and received a restraining order for the $1.7 billion planned token offering of Telegram’s blockchain.
The move from the SEC follows the continued dissolution of the corporate alliance that was supporting Facebook’s planned Libra cryptocurrency.
Telegram’s ambitious founder Pavel Durov was hoping to launch the Telegram Open Network as a payment option that would exist apart from the global regulatory system in much the same way that Libra would have done, according to initial TechCrunch reporting.
While the Telegram offering had been in the works since January 2018, it had run into problems by the middle of last year and the future of the protocol was already in jeopardy.
According to the SEC complaint, Telegram Group and its TON Issuer subsidiary began raising capital in January 2018 to finance the company’s business, including the development of the TON blockchain and Messenger.
The defendants sold 2.9 billion tokens at discounted prices to 171 initial investors, including more than 1 billion of the company’s tokens to 39 U.S. buyers.
Telegram said it would deliver the tokens to the purchasers by no later than October 31, 209 and the purchasers would be able to sell them into the market. According to the SEC complaint Telgram failed to register their offers and sales of the tokens, which the SEC considers to be securities.
“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, in a statement. “We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”