Telegram seeks to appeal the recent ruling of a US federal court in favor of the Securities and Exchange Commission to stop the distribution of GRAM tokens.
Rejection of the Injunction
Telegram filed a brief notice of appeal with the Court of Appeals for the Second Circuit in response to the court’s preliminary injunction earlier the same day freezing GRAM issuance until at least the trial.
The injunction itself tentatively agrees with the SEC’s argument that the contracts governing the issuance of GRAM appear to qualify as securities under the Howey test, although critically they do not necessarily tokens themselves:
“For reasons that will be more fully explained, the Court finds that the SEC has shown a substantial likelihood of success in proving that Telegram’s present plan to distribute Grams is an offering of securities under the Howey test to which no exemption applies.”
That’s bad news for Telegram ahead of trial.
In their appeal at least one commentator was not optimistic about the chances of Telegram. Philip Moustakis, attorney at Seward & Kissel LLP and former counsel at SEC, said Telegram’s legal team will have their work cut out before the appeals court for them:
“The standard of review on appeal is abuse of discretion — it’s a high bar — meaning Telegram will have to show the district court made some clear mistake of fact or an error of law.”
Telegram’s distribution of GRAMs has been on hold since the SEC’s October emergency action, in which the regulator deemed the initial $1.7 billion coin offering to be an unregistered and therefore illegal offering of securities.
Telegram’s distribution of GRAMs has been on hold since the SEC’s emergency action in October, in which the regulator deemed the $1.7 billion initial coin offering to be an unregistered and therefore illegal securities offering.
Telegram is Selling GRAMS Lawfully
It is worth noting that, Telegram received $1.7 billion in exchange in early 2018 for a promise to deliver 2.9 billion Grams from 175 sophisticated entities and high-net worth individuals. Telegram contends that the 2.9 billion Grams selling agreements are lawful private placements of securities covered by an exemption from the requirement to register.
In January, Cryptolydian reported that The Securities and Exchange Commission (SEC) continued its battle against the popular messaging company Telegram, stating “its Gram token worth less than donuts.”