The US Securities Commission (SEC) filed a complaint against TON Issue Inc and Telegram Group Inc, which aims to ban the GRAM token due to a violation of the terms of the token placement. How Pavel Durov reacted to the complaint and whether the launch of TON will take place on October 31, read more.
TON investors received a letter in which Durov announced a possible postponement of the TON launch date due to recent events. The letter also notes that further clarifications should appear within a week, but the founder of Telegram does not agree with the position of the SEC.
GRAM: security or utility
During the ICO, 2.9 billion GRAM were sold to 171 investors. Telegram pledged to provide investors with access to tokens until October 31, 2019, after which the cryptocurrency can be sold officially in the US markets.
The complaint is that GRAM tokens were recognized as security tokens, not utility. The difference between the two is their purpose. Utility is intended for internal use in a company with no explicit purpose of earning money from them, while security tokens are digital analogs of securities. Utility does not fall under the sphere of influence of the SEC, unlike security. «Valuable» tokens must be registered with the SEC, but this procedure was not carried out for GRAM.
The next question is why GRAM was recognized as a valuable token. For this, a Howey Test is carried out, in which the token is checked according to 4 parameters:
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- The token must be purchased with money.
- The company selling the token must be valid.
- Purpose of Acquisition – Receiving a profit.
- Profit can be obtained exclusively without the participation of the investor.
GRAM could be considered a valuable token, but there is a clause in the contract for its purchase that gives a negative answer to the third question. It says that investors will not receive any dividends from the purchase..
If the SEC agreed with this clause, GRAM would be included in the list of exceptions when security tokens can be traded without SEC control.
GRAM was going to sell under clause 506 (c), according to which trading can only be carried out by qualified investors. For this, the ICO was held in a closed circle of individuals.
But the SEC decided to recognize GRAM as a security token, citing the fact that investors expect significant profits from its sale. In the event of such an outcome of events, the token will most likely have to be removed from Telegram, because the application for the consideration of the case is already in court.
The history of the confrontation between the SEC and cryptocurrency projects provides two examples for predicting the future of GRAM: EOS and Kik.
In the case of the EOS ICO, the court did not even take place, as it was possible to achieve a pre-trial settlement and pay a fine of $ 24 million.The lawyers insisted that the tokens for the ICO (ERC-20 on the Ethereum platform) had not yet been subject to mandatory registration with the SEC during the ICO, after which they were frozen.
The second example concerns the ICO of the Kik messenger. The main position of the lawyers is based on the fact that the KIN token has nothing to do with making a profit. However, the project’s messenger stopped working in September and the case has not been closed at the moment..
No one knows for sure how the SEC will act in the future, but it is obvious that Durov should have had a plan for a long time. «B», since its implementation should take no more than two weeks. It is likely that the project will have to take an adjournment to resolve legal issues for all SEC requirements.
TON was not conceived solely as a messenger for cryptanarchists and the option of evading US laws is unlikely. At this stage, the brains of lawyers are boiling, not programmers.
There is still a positive side to this confusion. TON has once again received good publicity, since regardless of the outcome of the case, everyone is talking about it now.