SEC claims Telegram refuses to share ICO financial details

Telegram, which conducted a $1.7 billion unregistered ICO, has fallen foul of US financial regulators after refusing to share bank records relating to its token sale

The US Securities and Exchange Commission (SEC) has demanded that Telegram disclose its banking and financial details related to its $1.7 billion GRAM token sale. 

Telegram, which has so far resisted the SEC’s requests to share financial information, has argued that its tokens were sold solely to accredited investors, and therefore it is not required to share information with the SEC

However, the SEC believes that the financial information is crucial to the case, saying it will provide proof that the $1.7 billion raised from investors was actually spent on developing the platform and utility for GRAM tokens. 

In a letter filed on January 2, the SEC wrote:

“Defendants are now refusing to disclose the bank records concerning how they have spent the $1.7 billion they raised from investors in the past two years and to answer questions about the disposition of investor funds.”

The SEC argued that Telegram had already avoided revealing financial information to investors by selling an unlicensed security through its token sale, which sidestepped the requirement for a statutory prospectus. 

Discussing how Telegram broke securities laws, the SEC letter reads:

“Evidence shows that Telegram made continuous offers and sales of the Purchase Agreements well after the offering for which it claimed a Regulation D exemption.”

As a result, the SEC is now asking the Southern District of New York Court to pass an order compelling Telegram to fully disclose sources, amounts, dates, and use of funds raised during the sale. 

The emergency order seeks expedited discovery of Telegram’s financial history, including a complete list of all the entities who purchased GRAM tokens, and up-to-date accounts from Telegram’s token sale and expenditure. 

Telegram’s Response

The SEC’s letter seems to imply that Telegram was claiming not to have access to its own bank accounts and records as it had ‘switched banks’.

The claim, which the SEC described as “unfounded and deeply troubling”, may be seen as Telegram intentionally stalling the case or hiding crucial information, ahead of Telegram founder Pavel Durov’s deposition to the Court on January 7. 

Therefore, the SEC has urged the Southern District of New York Court to act before Durov appears in court. 

In November, Telegram representatives accused the SEC of being ‘unconstitutionally vague’, claiming that the regulator had failed to provide adequate guidance during and after the GRAM token sale. 

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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