As discussed in the previous article, Telegram is a world-famous instant messaging company. In 2018, he sold the contract rights to a new crypto asset he developed (called Grams) to a group of certified (and wealthy) investors around the world. Telegram has attracted around $ 1.7 billion from 171 investors, including 39 buyers from the United States. This was a preacher of the planned launch of Grams, which was to take place in a year and a half, in October 2019.
This two-step process, in which the crypto contractor sells the contractual rights to acquire the cryptoassets at launch to finance the development of the asset and its network, is called the Simple Future Token Agreement, or SAFT process.
SAFT uses a two-step bidding process similar to that used by traditional companies that sell simple stock futures or SAFEs. It is recognized that the sale of contractual rights is secured and therefore is intended to comply with one of the US exceptions to registration. In the Telegram case, there was, as usual, an exception to Rule D, Rule 506 (c). For this exception, all buyers must be approved investors and verified by or on behalf of the issuer.
While the SECURITY process is widespread, the US Securities and Exchange Commission opposed the sale of Telegram’s rights under contract and filed for approval of the Grams issue in October 2019. On March 24, 2020, in a decision that was published and followed, Peter Castel introduced a comprehensive initial order that prevented Telegram from releasing the planned cryptoactive Grams.
The reason for the lawsuit was that the whole process, from start to finish, was part of a single scheme, and the original SAFT buyers did not buy for personal use, but to facilitate a broader distribution of the asset. This, according to the SEC and the court, meant that SAFT’s buyers were guarantees. Since they wanted to resell most of the grams as quickly as possible to buyers who were not all certified, the entire offer was in violation of US securities laws.
This is a complex and complex legal argument related to some of the more complex definitions of securities law. In a dangerous simplification that a stock lawyer is likely to complain about, all sales that are part of a single offer must meet the requirements of this offer.
In other words, if the exemption offered is based on requiring all buyers to be verified as approved investors, sales included in the offer cannot be made to an unqualified person. To ensure that the issuer of the securities does not secretly evade exemption claims, the issuer may not sell to an approved investor just for that person to turn around and resell to another unqualified person. The buyer who does this acts as a surety.
The difficult part is how to determine if resale is part of the original offer. And here’s another confusing legal concept. If there are significant differences between two sales, they should not be combined or treated as part of the same offer. Instead, the securities will be considered to be in the hands of the first buyers, and subsequent resale will not eliminate the original exclusion.
The so-called doctrine of complementarity must work on five factors:
Is part of the sale included in the same financing plan?
Is the issue of a class of securities implied?
Are they taken at about the same time or around the same time?
Is this related to the same consideration?
Are they created for the same general purposes?
You can go back to Telegram’s view and find no discussion of these factors, which the court evades, referring to the whole plan as a single scheme for the sale of contract rights, not contract rights.
In fact, if these factors were taken into account, it appeared that the sale of Telegram’s contractual rights should not have been integrated with the sale of Grams. Telegram raised the money needed to develop Grams and operate the Telegram Open Network with an initial sale of contract rights.