Pavel Durov has been called to court in the U.S. for the illegal emission of Gram
The New York Southern District Court ruled that Pavel Durov, along with two other Telegram employees, should appear in court and testify about the issuance of Gram digital tokens, which the SEC suspended in October 2019.
Pavel Durov and his colleagues are invited to testify on January 7 or 8, 2020, at a "place agreed upon by the parties".
Besides to Durov, testimony will be given by Vice President Ilya Perekopsky, who was responsible for liaising with investors during Telegram's $1.7 billion token sales last year, and by employee Shyam Pareh, whose name was mentioned in Telegram's letters to investors who had fled to the media after the SEC sued the company. Interrogations with Perekopsky and Parekh will take place on December 16 and 10 in London.
In a month, Telegram and the SEC will meet in court at the main hearings, where the fate of the Gram token, which the SEC considers an unregistered security, will be decided.
On October 11, the U.S. Securities and Exchange Commission obtained a temporary injunction against two offshore companies, Telegram Group Inc. and TON Issuer Inc., which were engaged in the initial public offering of Gram's cryptocurrency in the U.S. and other countries. The SEC reported that it questioned the legality of Telegram's cryptocurrency turnover.
According to the regulator, between January and March 2018, Telegram and TON sold 2.9 billion digital tokens to 171 customers worldwide, including over 1 billion tokens to 39 US residents. The company raised $1.7 billion, including $424.5 million in the US market.
Our emergency action today is to prevent flooding of the U.S. markets with digital tokens, which we claim were sold in violation of the law," said Stephanie Avagyan, co-director of the SEC's Decision Execution Department. - We argue that the defendants did not disclose to investors sufficient information about the business projects of Gram and Telegram, about the financial condition of the companies, risk factors and management, which are required by the securities legislation.
We have repeatedly stated that issuers cannot avoid federal securities laws by simply labeling their products with cryptocurrency or digital token," said Stephen Peiki, a colleague. - Telegram seeks to benefit from a public offering without complying with longstanding disclosure obligations aimed at protecting investors.
The SEC noted that the investor does not receive enough information about the ability of the issuing company to generate profits, nor does it receive information about how much of the ICO the Durov brothers will receive.
After that, Telegram offered investors of the TON cryptocurrency project to agree to postpone the launch of the TON until April 30, 2020 or to get a return of about 77% of the investment. Investors agreed to wait.
Attorneys at law for Telegram Group Inc. have notified the Southern District Court of New York that the company intends to postpone the launch of its blockchain platform Telegram Open Network (TON), ready to suspend operations relating to Gram's cryptocurrency, but considers some of the claims of the U.S. Securities and Exchange Commission unfair.
The U.S. Securities and Exchange Commission has imposed a temporary ban on the distribution of tokens. The SEC requires Telegram to commit to "not offering, selling or transferring its intended cryptocurrency, called Gram, in order to maintain the current state of affairs until the court has been able to resolve all legal issues that underlie the case.
"Although the commission's demands are not justified, and Telegram is prepared to immediately challenge them in court, Telegram has decided to postpone the launch of the TON blockchain platform and any distribution of Gram until the data and any other regulatory issues are resolved," Telegram's application says. At the same time, the attorneys ask not to impose appropriate prohibitions, as they may be "misinterpreted" by the public. The company is in favour of "the parties consulting immediately to decide the case".
The company's attorneys point out that Telegram "has interacted with the U.S. Securities and Exchange Commission over the past 18 months and requested information from it on the launch of the TON and Gram blockchain platform, which is consistent with the commission's statements of willingness to engage with digital asset developers. This included "thousands of pages of documents and contact information for U.S. customers. Representatives of Telegram "participated in the presentations, during which they answered hundreds of questions. In response to SEC objections, the developers made appropriate "changes to the technology and operation of the TON blockchain platform.
Telegram said that the SEC's demands were "sudden" because the regulator had never made it clear before that it considered it necessary to postpone the launch of the TON blockchain platform.
The fundamental dispute is whether tokens are considered securities. The SEC argues that Gram should be considered a security and applied to it by the U.S. law. Telegram argues that this "contradicts longstanding precedents in the Supreme Court, the position taken by the commission in relation to other cryptocurrencies, as well as common sense. For more details on the legal disagreements between the SEC and Telegram, see here. The New York Southern District Court must resolve this dispute.
Meanwhile, the project is developing in the background. At the beginning of September, the code for TON blockchain nodes was released. Investors were sent instructions to generate public keys and send them to the company for planned token distribution. The company has released the Test Gram Wallet application for Linux, Windows and MacOS, which is still running on the test network. Enthusiasts have released applications for Android and iOS.