The case against Telegram by the U.S. Securities and Exchange Commission (SEC) has hit a snag as a court has denied the Commissions requests to view the company’s financials, reports FinanceFeeds.
First Blood to Telegram
According to FinanceFeeds, a New York Southern District Court has struck out a motion by the SEC demanding documents detailing the use of investor funds from the Telegram ICO. Judge Kevin Castel reportedly held a teleconference with all parties involved to deliver his decision on the matter.
Despite the court’s decision, the SEC can still obtain access to some of Telegram’s financials. The messaging giant will have to set forth a declaration of certain bank records in accordance with foreign data privacy laws.
Earlier in January 2020, BTCManager reported that Telegram was stonewalling the SEC’s attempts to look at its books. With this judgment, Telegram has secured a temporary relief from the Commission, but the legal tussle appears far from over.
In 2018, Telegram raised about $1.7 billion from a private ICO, becoming one of the largest crypto token sale events in the industry. Despite being closed off from U.S. investors, the SEC alleges that Telegram paid commissions to resellers of its Grams tokens to investors, including those from the U.S.
If true, such an action would render those resellers underwriters, giving the SEC legal grounds to go after Telegram for selling unlicensed securities to U.S. investors. For the SEC, Telegram’s bank records remain relevant to the nature of the company’s activities during and after the $1.7 billion ICO.
SEC Unrelenting in Pursuit of Errant Crypto ICOs
Telegram’s ICO isn’t the only focus on the SEC’s investigation into token sales. Since the 2017 crypto boom, the Commission has stepped up its efforts to prosecute projects deemed to be offering unlicensed crypto securities.
For the SEC, most ICO tokens constitute securities based on the principles set forth by the Howey Test. So far, the Commission has issued fines, indictments, and penalties against a host of ICO projects.
As previously reported by BTCManager, the SEC has brought the hammer down on the likes of Shopin, ICOBox, and Kik. Even celebrities endorsing ICOs and crypto projects have also had run-ins with the SEC.
Meanwhile, U.S. lawmakers are looking to pass legislation that would ease up securities regulation for cryptos. Proposed bills like the Token Taxonomy Act aim to exempt cryptocurrencies from securities laws. It remains to be seen whether the U.S. Congress will pass these laws.