The U.S. Securities and Exchange Commission filed a new document on Wednesday regarding the ongoing Telegram ICO case. The regulatory agency made a new remark, claiming that the company created the TON initial coin offering (ICO) funding project to support its servers.
The official statement from Telegram at the time asserted that the company seeks to create a new blockchain network for its messaging app. However, the newest document from the SEC states that CEO Pavel Durov sought to raise money in an attempt to pay for IT equipment. Additionally, the CEO reportedly sought to hold an equity sale before projecting the ICO.
Will the SEC succeed in marking the ICO as an unregistered security sale?
The U.S. SEC severely prolonged Telegram’s TON roadmap by launching an investigation against the company in October 2019. As a reminder, the ICO sale took place at the start of 2018 and raised $1.7 billion. Nevertheless, the SEC seeks to win the ongoing court case by legally declaring the GRAM token an unregistered security. Furthermore, the SEC demands from Telegram to not launch TON.
While the next court trial is set for February, the latest filing shows that the U.S. regulatory agency may win the case. Previously revealed documents, submitted to the District Court for the Southern District of New York, have already shown that Durov personally funded the messaging app so far. However, the newest SEC filing reveals that the CEO no longer has the funds to sustain Telegram, stating that:
“In 2017, Durov therefore needed ‘cash’ to buy Messenger’s servers and pay for related services. He considered selling traditional voting equity but decided against it, ‘concerned that [it] would affect the company’s integrity its values, and ethos…Nor did Telegram wish to start charging users or selling ads, believing that doing so would hamper its ability to expand its user base and keep up with competitors.”
Exchange logs support U.S. SEC claim
To confirm the theory as a fact, the agency attached message logs exchanged between Telegram’s CEO and Alexander Tamas, the founder of Vy Capital. Tamas is also a former partner at DST Capital, a stakeholder of Russia’s main social platform Vkontakte, founded by Durov in 2006.
According to the logs, the founder of Vy Capital offered Telegram’s CEO the chance to purchase shares worth $25 million of a company whose name remains unknown (redacted by the SEC.) Following the offer, Durov stated that he requires more money to support Telegram’s server but that he would consider the offer at a later time.
“At this point Telegram needs cash to keep buying more servers, but I can start considering such ideas after we solve our cash requirements.”
As CryptoPythia previously reported, the prolonged investigation caused a delay in TON’s mainnet release. Cryptocurrency exchange Liquid, which held an ICO sale separate from the official one, recently announced that it would return all investor funds. The reason behind this is a clause that stated that all funds would be returned if the mainnet would not launch by the end of October.