Messaging app to pay USD 18.5 million over unregistered offering of securities

  • 10 July 2020

ORX News story of the month: June 2020

Each month, we share a free operational risk loss event story from ORX News. The story is handpicked by the team as one of the most interesting stories reported by the service in the previous month. This story was published by the service in June 2020.

Telegram to pay USD 18.5 million over unregistered offering of securities

Messaging app Telegram was fined $18.5m by the US Securities and Exchange Commission for an illegal offering of securities between January 2018 and March 2018.

Under the purchase agreement, Telegram’s subsidiary, TON Issuer, was to issue a new cryptocurrency called “Grams”. The SEC did not consider “Grams” a cryptocurrency as there were not any products or services that could be purchased with Grams. Instead, the SEC found that Grams were a security, as investors expected that they would profit from purchasing Grams, if Telegram delivered on the promised functionalities. Telegram had hoped to use the proceeds from selling Grams to fund the development of its new blockchain technology and had planned a secondary offering of Grams in October 2019. 

As the SEC considered Grams a security, it was able to secure an injunction against the secondary offering of Grams, as Telegram had failed to file a registration statement with the regulator. In addition, purchasers of Grams would not receive any documentation about Telegram’s operations, financial condition, or other relevant factors. 

In consenting to the final judgement, Telegram agreed to pay a civil penalty of $18.5m. Furthermore, the judgment ordered Telegram to repay $1.22bn of “ill-gotten” gains to its investors. 

You can read the press release here: https://www.sec.gov/news/press-release/2020-146

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Op risk losses categorised for easy analysis

Every single ORX News story is categorised to help you get the most from the data. The categories include the business line, event type, scenario category. All of this information makes it easier for you to use and analyse the loss events.

Extract of the data for this story from ORX News:

Business line: Trading & Sales
Event type: Clients, Products & Business Practices
Loss amount: USD 18,500,000.00
Country: United States
Scenario category: Retail Mis-selling

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