In its latest submission in a case against private messaging app provider Telegram, the SEC claims that, Telegram has been using funds raised to develop the TON blockchain to rather cover operating expenses at the messaging business.
Telegram raised $1.7 billion USD from 171 purchasers of GRAM tokens in January and March 2018.
According to the regulator:
“From the time of the Offering, ‘way over 90’ percent of Telegram’s expenses have been funded from Offering funds.”
The SEC also says that Telegram CEO Pavel Durov wrote in January 2018 that the company “abandoned” plans to raise money by selling equity in favour of the “current strategy” of selling tokens.
The allegation is contained in the SEC’s Motion for a Summary Judgement submitted last Thursday.
According to Lawyers.com, a summary judgment motion, “is a request for the court to rule that the other party has no case, because there are no facts at issue. The party making the motion is claiming that either the case should not go before a jury at all, or a jury could only rule in favor of the moving party.”
In this particular case, the SEC claims in its 72-page submission that the facts presented overwhelmingly indicate that Telegram and GRAM token purchasers knowingly transacted GRAMs as an investment vehicle, and that, “there is no genuine issue to be tried…”
The regulator further alleges that, before the GRAM offering, Telegram, which hosts 300 million users, was funded “exclusively” by personal funds CEO Pavel Durov accumulated when he sold his VKontakte (Russian Facebook-like) platform.
Further, Telegram, “has never charged users a fee for using Messenger because it has a long term vision focused on growth, and believes it would not be commercially sensible to start charging users.”
Telegram initially promised to integrate TON for payments into the messenger app, which the SEC contends led GRAM purchasers to believe that the, “success of Telegram’s messenger platform and the strength of its team led investors to view TON as a good investment opportunity, likely to generate returns for their firms.”
According to the SEC, all 8 of the entities that submitted “Sworn Declarations…by…Initial Purchasers” stated they bought GRAM tokens for, “possible consumptive use of (a) portion of Grams but primarily hoped to sell for profit.”
Three of the initial purchasers swore they, “purchased Grams with the hope that there would ultimately be a secondary market for trading Grams, including because of direct communications with Telegram about listing Grams on exchanges.”
The filing also contends that Telegram’s Vice President has his own crypto trading platform, Blackmoon Financial Group, which planned to list the GRAM tokens for secondary sale.
Telegram also, “began discussions with a number of digital asset trading platforms (including Coinbase and Liquid- CI) starting in January 2018 and continued these discussions right up until the filing of the SEC’s lawsuit,” the SEC alleges.