News broke out yesterday that the Securities and Exchange Commission of the US has temporarily halted the token sale of Telegram’s TON cryptocurrency. According to the documents, the reasoning behind the SEC’s actions is that the alleged token sale is unregistered and fails to comply with the existing regulations. Let’s examine the difference between the current actions and what happened with EOS a while ago.
Telegram’s Token Sale Halted
Back in January 2018, Telegram raised a substantial amount of capital worth over a billion dollars to develop their very own blockchain deemed the Telegram Open Network. In fact, as Cryptopotato reported, the company was supposed to launch its cryptocurrency wallet either in October or November.
However, it appears that Telegram’s plans may be for not, as the SEC has stepped in, ordering a halt against Telegram and the Telegram Open Network. According to the official release, the Commission has found that the cryptocurrency subjected to last year’s sale were actually sold unlawfully.
Commenting on the matter was Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, who noted:
Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold. […] “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.
Adding to the point was also Steven Peikin, another co-director of the Commission who said that Telegram seeks to obtain the benefits of a public offering without actually complying with the established and existing regulations.
Just a while ago, the SEC charged EOS with a $24 million fine for conducting their unregistered ICO which raised upwards of $4 billion.
What’s Different From The EOS Case?
Following the SEC charges, Cryptopotato spoke to Tomer Ravid, CEO at BloxTax, who explained at length the merits of the charges and why was the amount fairly inconsiderable given the overall capital that Block.one managed to raise.
Following the Telegram action, we reached again and Ravid explained why is the situation rather different when comparing both cases.
According to him, the main difference is that EOS had little to no activity prior to their Initial Coin Offering. Hence, there was little to disclose. On the other hand, however, Telegram has a real company with activity which backs it and there are expectations that they would have needed to disclose a lot of information. He also sais that it seems that the SEC believes that there might be grounds for fraudulent activity, which is something that wasn’t part of the case against EOS.
Additionally, Ravid also said that there is a similarity with the claims that the SEC made against KIK. He said that there is a lack of disclosure, failure to provide information that a reasonable investor would need to have in order to formulate an investment decision. This was also claimed in KIK’s case, which is the base for the fraudulent claim against the company.
In any case, we have yet to see how the situation will develop. It’s clear, though, that the SEC is stepping up and it’s taking serious actions against companies that seek to access the US capital market through an initial coin offering or other kinds of token sales.