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US SEC secures order to halt Telegram's $1.7B initial coin offering

The U.S. Securities and Exchange Commission secured a restraining order to pause Telegram Group Inc.'s planned U.S. digital token offering of more than $1.7 billion.

The SEC said Oct. 11 that Telegram and its unit TON Issuer Inc. violated U.S. securities laws for allegedly selling about 2.9 billion digital tokens, or "grams," with unregistered securities. It noted that the coins were sold at discounted rates to 171 investors globally, including 39 in the U.S. Telegram promised to deliver the tokens no later than October-end.

Telegram reportedly earned $850 million in each of two gram offerings from January to March 2018. The company intends to use the offerings' proceeds to fund its mobile app Telegram Messenger, as well as its Telegram Open Network project that aims to create an online services platform based on blockchain ledger technology.

"Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public," said Steven Peikin, co-director of the SEC's enforcement division.

The order against Telegram is the latest blow to cryptocurrencies, with Facebook Inc.'s digital coin Libra also facing regulatory backlash over concerns such as those related to financial stability and data privacy.