ANNA: Making Sense of the SEC's Case Against Telegram

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4.8 • 689 Ratings

🗓️ 12 April 2020

⏱️ 46 minutes

🔗️ Recording | iTunes | RSS

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Summary

Telegram, the popular messaging app, has big plans for its blockchain Telegram Open Network, or TON. It also had one of the biggest token sales in history, followed by a huge legal fight over it.

The U.S. Securities and Exchange Commission (the SEC) sued the company to stop its $1.7 billion private token sale, saying the future tokens for TON, called grams, are unregistered securities. Telegram argued grams were a commodity. A federal court judge in New York issued a preliminary injunction agreeing with the SEC, blocking Telegram from issuing tokens.

The court battle has been an interesting one, as is the ruling of the judge. Together with two experienced attorneys, Gabriel Shapiro of BSV Law and Phillip Moustakis of Seward & Kissel, we’re unpacking this process, which is likely to set a precedent for other token sales structured as SAFT, or simple agreement for future tokens – starting with Kik and potentially followed by many more.

SAFTs used to be a popular form of fundraising in crypto – What went wrong for Telegram?
Is there still a chance an ambitious proof-of-stake blockchain will still get launched?
Is there still a safe way to raise money via a token sale or not?
What are the remaining options for Telegram – and for its investors?

Transcript

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0:00.0	It's prima facie absurd that a venture capital fund would buy these tokens, which have no revenue stream attached to them, no rights whatsoever attached to them, etc.
0:15.0	And that are styled as ultimately becoming a consumer good.
0:19.0	It's prima facie absurd that they would buy those as a long-term investment
0:22.7	rather than to flip them very quickly in the secondary market, because that's just not the kind of thing
0:28.0	venture capital funds do.
0:31.9	Hi, everyone. I'm CoinDesk reporter Anna Baidakova, and I'm speaking today with two legal experts.
0:38.8	Philip Mustakis, a council with the law firm, Seward and Kissel.
0:43.1	He also previously worked at the SEC.
0:45.6	And Gabriel Shapiro, who has just recently joined Belcher, Smolin and Van Loo,
0:50.9	which is also read like BSV law as a partner. Congratulations, Gabriel. And you might also
0:58.0	be following him on Twitter as Lex Knot. Thank you for being here, gentlemen. We are talking
1:04.0	today about one very particular case, Telegram and its court battle with the U.S. Securities and
1:10.6	Exchange Commission.
1:11.6	It's been a big case. Lawyers in the blockchain space have been following it closely.
1:17.6	Two major trade groups, the Chamber of Digital Commerce and the Blockchain Association expressed their support for Telegram.
1:24.6	And it looks like the final decision on this case when it's made will have
1:28.2	implications for the entire industry. On March 24th, the New York Southern District 4 judge,
1:35.4	Kevin Castel, agreed with the SEC lawsuit and prohibited Telegram from issuing and distributed
1:41.5	the tokens for its own blockchain.
1:48.8	And first of all, I think I'd like to hear your perspective of this, Philip,
1:51.8	as you used to be with the SSEA Division of Enforcement.
1:58.0	If we had to explain it to somebody totally not following the regulatory agenda,
	...

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