## Facts

- Telegram Group Inc. and TON Issuer Inc. planned to fund and launch the Telegram Open Network (TON) and a token called “Grams.”
- In early 2018, Telegram raised about $1.7–$1.75 billion from roughly 171–175 sophisticated purchasers worldwide through “Gram Purchase Agreements,” promising delivery of about 2.9 billion Grams upon TON’s launch.
- Telegram conceded the purchase agreements were securities sold in a private placement, but argued the later-delivered Grams and purchasers’ subsequent resales would not be securities transactions requiring registration.
- The SEC alleged Telegram’s financing and planned delivery/resale structure was a single integrated distribution of unregistered securities to the public, with initial purchasers acting as intermediaries to place Grams into secondary markets.
- Telegram expected Grams to trade broadly and quickly after launch, with purchasers profiting from price appreciation driven by Telegram’s development, launch, and integration of TON with its messaging platform.
- The SEC sued under Securities Act §§ 5(a) and 5(c) and sought a preliminary injunction to stop Telegram from delivering Grams before trial.

## Issues

1. Whether the overall transaction structure (purchase agreements, development and launch of TON, delivery of Grams, and expected resales) was an unregistered offering of securities under the Howey investment-contract test.
2. Whether the initial purchasers were “underwriters” whose planned resales would be part of a distribution, defeating reliance on private-offering exemptions.
3. Whether the SEC showed a substantial likelihood of success and the equitable factors required for a preliminary injunction barring delivery of Grams.

## Decision

- The court granted the SEC’s motion for a preliminary injunction and barred Telegram from delivering Grams to initial purchasers.
- The court found a substantial likelihood that Telegram’s fundraising and planned delivery/resale were a single integrated scheme to distribute unregistered securities in violation of Securities Act §§ 5(a) and 5(c).
- The court concluded the initial purchasers functioned as underwriters because the structure contemplated their prompt resales into public markets.
- The court found irreparable harm and that the balance of equities and public interest favored an injunction to prevent an irreversible public distribution lacking registration disclosures.

## Legal Principles

- Courts applying Howey assess the economic reality of the full arrangement; transactional steps may be integrated when they are parts of a single distribution plan.
- An “investment contract” exists where purchasers invest money in a common enterprise with a reasonable expectation of profits derived from the managerial or entrepreneurial efforts of others.
- Digital assets are not automatically securities; whether a token distribution involves securities depends on the transaction’s structure and purchasers’ profit expectations tied to an issuer’s efforts.
- A purchaser can be an “underwriter” when acquiring from an issuer with a view to distribution; planned resale into public markets can make private-offering exemptions unavailable for the overall distribution.
- Preliminary injunctive relief is warranted where likely Securities Act violations would result in an irreversible public distribution and deprive public market participants of registration-statement disclosures.

## Conclusion

The court enjoined Telegram’s planned delivery of Grams, holding the SEC was likely to prove that Telegram’s private sale and anticipated public resale formed a single unregistered securities distribution under Howey, with initial purchasers acting as underwriters, and that equitable factors supported stopping an imminent, irreversible market dissemination without required disclosures.


Sec. & Exch. Comm'n v. Telegram Grp. Inc., 448 F. Supp. 3d 352 (S.D.N.Y. 2020)