Telegram Fights Back Against SEC with New Legal Precedent

Understanding Telegram’s Legal Troubles

It’s not every day you hear about a messaging app going head-to-head with the U.S. government on the grounds of securities laws. But Telegram, the brainchild of Pavel Durov, is embroiled in a legal kerfuffle with the SEC over its 2018 ICO, which raised an astounding $1.7 billion for the Telegram Open Network (TON). The seeds of this drama were sown last October when the SEC decided to investigate Telegram’s offering. Talk about a long game!

What’s the SEC’s Beef?

The SEC isn’t your average neighbor concerned about a loud party. Their main issue is that the Grams, the tokens sold during the ICO, would eventually hit the open market and potentially lead to chaos—think stock market meets Black Friday. Telegram filed for a “Notice of Exempt Offering of Securities,” which sounds good until you realize they were accused of setting the stage for an unlawful reselling frenzy. The SEC placed a temporary restraining order on the issuance of tokens. Clearly, they weren’t in the mood for a crypto free-for-all!

Telegram Pulls a Court Ruling Out of Its Hat

In its March 6 letter to Judge Castel, Telegram referenced a recent ruling from the California Court of Appeal, Second Division. While the ruling didn’t involve crypto, Telegram sees parallels in terms of legal interpretation. It’s like pulling a rabbit out of a hat—if that rabbit was in a different hat, at a different show, but hey, a rabbit’s a rabbit!

What They’re Arguing

Telegram’s argument hinges on the wording found in the purchase agreement for Gram tokens. They suggest that the economic realities of their offerings were not about distributing securities illegally, but rather, they were trying to stay clear of securities laws altogether. It’s like saying, “Hey, we weren’t breaking the rules; we just wanted to play a different game!”

Disagreements and Definitions

While Telegram and the SEC do agree on a fundamental point (their ICO involved securities), they diverge sharply on whether the Grams themselves qualify as securities. It’s a classic case of ‘you say tomato, I say fraud’. Telegram believes its agreements reflect a detailed intent to comply with the law, while the SEC sees these agreements as smoke and mirrors. Talk about a battle of semantics!

The SEC’s Comeback

The SEC has fired back with a letter of their own, stating that Telegram’s approach is just a fancy dance around the real issue. They argue that Telegram’s reliance on legal jargon does little to change the transactional reality—essentially saying, “Just because you call a cat a dog doesn’t mean it’s going to bark!”

What’s Next for Telegram?

As the case unfolds, Telegram is digging its heels in, adamant about the legality of its offerings. Stay tuned, folks! This legal saga might just rival a season finale of your favorite courtroom drama. Who will come out on top? Only time—and a whole lot of legal briefs—will tell!