The U.S. Securities and Exchange Commission (SEC) has taken legal action against Telegram and its TON blockchain project, accusing the company of conducting an unregistered $1.7 billion initial coin offering (ICO) in 2018. A hearing at the Southern District of New York is scheduled for October 24, just days before Telegram's planned public launch of the TON network and its native GRAM token.
Regulatory Storm Over $1.7B ICO
Telegram raised a total of $1.7 billion through two private token sales in 2018, selling about 2.9 billion GRAM tokens to global investors. According to the SEC complaint, U.S. investors purchased approximately $425 million worth of tokens, representing a quarter of the total. Two entities — Telegram Group Inc. and its subsidiary TON Issuer Inc. — are named as defendants. Steven Peikin, co-director of the SEC’s Division of Enforcement, stated: “Issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token.”
Legal Allegations and Potential Fallout
The SEC argues Telegram sold GRAM tokens to U.S. investors without proper registration, effectively conducting an illegal securities offering. Secondary sales before the public release, such as early investor Gram Asia’s offer at $4 per token on Liquid exchange (compared to the private price of $1.33), also drew scrutiny. Regulators fear that once GRAM circulates freely, they will be unable to track investors or future transactions.
TON is a high-performance blockchain designed for smart contracts and decentralized applications, aiming to serve Telegram’s 300 million+ users with a digital payment system. The GRAM token would be used for services like decentralized storage, domain registration, and censorship-resistant features. If the SEC prevails, the TON launch could be delayed, or GRAM tokens might be frozen or subject to restructuring.
Divergent Views Within the Community
Yakov Barinsky, head of Russian crypto investment firm Hash CIB, predicted: “TON will likely launch with limited functionality, and GRAM might be blocked from transfer between accounts.” Telegram’s team expressed surprise and disappointment, noting they had spent over a year seeking SEC guidance. Founder Pavel Durov, who left Russia after refusing to hand over encryption keys to the FSB, now faces a new regulatory clash. The company is considering a delayed launch or a stripped-down version.
The legal uncertainty has cast doubt on the project’s future, with investors and the crypto community awaiting the outcome of the October 24 hearing, which could impact millions of users and billions in capital.