The SEC has a long and complex history with digital token offerings as a few years ago when initial coin offerings were all the rage, the SEC shut down dozens of them for the reason that many were on registered or fraudulent in themselves. Also, one of the most complicated issues to date is the proper definition of the security token and this has led to the SEC being sued by Kik, a messaging platform, who claims that the SEC’s classification of the kin token as a security is false. While the case is still ongoing, the SEC’s business with digital token offerings has not come to an end by any means.
On October 11, 2019, it was announced that the SEC has filed an emergency action and restraining order against Telegram and the Telegram Open Network (TON) and this was done in the central District Court of Manhattan.
The reason that the SEC took this action against Telegram and the Telegram Open Network is because it has ruled that the upcoming GRM token offering constitutes an illegal token offering and as such, wish to have it shut down and have demanded that Telegram halt all activities regarding the token sale.
In the complaint, it stated that Telegram did not register or seek proper approval for the GRM token and the securities law of 1933 states that all securities must be registered and approved by securities and exchange commission and because the GRM token has not gone through this process, it is deemed an illegal securities token.
“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, the co-director of the SEC’s Division of Enforcement.
On the same days that announcement was made, the SEC also made a joint announcement with the U.S. regulatory agencies, the Commodity Futures Trading Commission and the Financial Crimes Enforcement Network towards crypto users and one of them was about the violation of the bank secrecy act and emphasized the use of cryptocurrency for money laundering and illegal activities.