Telegram's cryptocurrency kickoff halted by SEC

An unregistered initial coin offering had already raised $1.7 billion, according to the Securities and Exchange Commission.

Angela Lang/CNET

An initial coin offering by encrypted messaging service Telegram has been halted by a restraining order filed by the US Securities and Exchange Commission. According to the SEC on Friday, the emergency action will temporarily prevent what it alleges is an unregistered ICO that's already raised $1.7 billion. Around 2.9 billion digital tokens called grams have been sold to 171 purchasers, the SEC alleges.

Telegram had announced its plans in late August to kick off its own cryptocurrency and is planning to launch its blockchain by Oct. 31, according to the SEC.

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The SEC alleges Telegram and subsidiary TON started raising funds to develop the TON Blockchain or Telegram Open Network, as well as the Telegram Messenger app, back in January 2018.

The sales of Grams were also not registered despite being securities, the SEC has alleged.

"Our emergency action today is intended to prevent Telegram from flooding the US markets with digital tokens that we allege were unlawfully sold," said Stephanie Avakian, SEC co-director of enforcement. 

Telegram didn't immediately respond to a request for comment.