Encrypted messaging service Telegram wants to postpone the launch date of its Telegram Open Network (TON) following issues with the United States Securities and Exchange Commission (SEC).
According to an investor message seen by Cointelegraph on Oct. 16, Telegram told investors that it wants to push back the deadline to April 30, 2020.
The launch was initially set for late October when the SEC abruptly declared its $1.7 billion dollar token offering to be illegal. Telegram raised the massive sum for its new network by selling TON’s native Gram (GRM) tokens to qualified investors in two separate rounds.
Problems with registration and securities classification
In February 2018, Telegram submitted a Form D filing, which is used when a company sells a security without registering it with the SEC.
Under Form D, a firm is allowed to proceed with a securities offering without registering with the SEC, should it offer it solely to qualified investors. However, since the investors in GRM tokens would be able to resell their assets, the SEC considered this a violation of the exemption.
As such, the commission’s full complaint alleges that Telegram and TON did not register their sale of GRM tokens, which the SEC considers securities.
Vote required to move back deadline
In today’s letter to investors, Telegram states that moving the deadline requires the permission of holders of a majority of purchase amounts paid to Telegram regarding the Stage A purchase agreements. The deadline in the purchase agreements from the pre-sale round can also be extended in the same manner.
However, this means that one round of investors could vote to extend the deadline, while the other does not. In such an event, Telegram states:
“In the event that only one group approves the extension, then that group’s purchase agreements will remain in place while the other group of agreements will be terminated. In these circumstances, we propose to make certain limited amendments to the terms of the purchase agreements that remain in place to reflect the fact that fewer Grams will be issued and in circulation on the Network Launch Date.”
Telegram is asking investors to make their decision regarding the deadline extension before Oct. 23.
The firm is scheduled for a hearing with regulators in New York on Oct. 24, where it will make its case that it was compliant and that the SEC is incorrect in its assessment.