Court Kept Telegram’s Gram Injunction Global Despite Proposed U.S. Safeguards

A federal judge on April 1, 2020 denied Telegram’s request to limit a preliminary injunction against distributing its planned Gram tokens, leaving the restriction applicable to initial purchasers inside and outside the United States.

The ruling kept Telegram from pursuing an international carveout for one of the largest token-financing projects of the 2017–2018 offering cycle. It also demonstrated how a court could evaluate a token distribution as one integrated economic arrangement rather than separating private purchase agreements, future tokens and expected secondary-market resales.

The injunction remained broad

Telegram had raised approximately $1.7 billion in 2018 through agreements covering the future delivery of 2.9 billion Grams to 175 initial purchasers. The proceeds were intended to support development of the Telegram Open Network, or TON Blockchain, and Telegram Messenger.

On March 24, 2020, Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York granted the Securities and Exchange Commission’s request for a preliminary injunction. The court found that the SEC had shown a substantial likelihood of proving that the agreements, Telegram’s undertakings and the anticipated public resale of Grams formed an unregistered securities distribution.

Telegram filed a notice of appeal on March 24. In a March 27 request for clarification, it argued that the injunction should not prevent delivery to non-U.S. initial purchasers. Telegram maintained that both defendant entities were foreign and that the relevant agreements with foreign purchasers had been made outside the United States.

The April 1 order rejected that request. The court emphasized that Telegram had not challenged the proposed injunction’s geographic scope when it originally opposed the SEC’s motion, despite having an opportunity to do so.

Proposed safeguards did not persuade the court

Telegram proposed contractual restrictions intended to prevent non-U.S. purchasers from reselling Grams to U.S. buyers. It also suggested configuring its TON Wallet to exclude addresses associated with the United States.

The court identified several limitations. Telegram had not established that it could lawfully add the proposed restrictions to agreements executed in 2018. More fundamentally, the court observed that the TON Blockchain was designed to provide anonymity to Gram buyers and sellers. Users could self-report their location inaccurately, while independently developed wallets could operate outside the controls of Telegram’s official wallet.

The judge therefore found that Telegram had not shown how its safeguards would be effective or enforceable. Intended secondary-market resales were still likely to reach U.S. purchasers, the order concluded at the preliminary-injunction stage.

That conclusion did not establish that every future Gram transaction anywhere in the world would itself be a securities transaction. It addressed whether Telegram could proceed with the distribution scheme then before the court while the SEC’s case remained pending.

Why the distinction mattered

Telegram’s position treated the private purchase agreements and the eventual utility token as legally distinct stages. The court instead focused on the full set of contracts, expectations and planned resales surrounding the offering.

That approach mattered to other token issuers using private agreements to finance blockchain development before delivering functional assets. The April 1 order indicated that restricting the first sale to sophisticated or foreign purchasers would not necessarily isolate a project from U.S. securities law when wider public distribution was an expected part of the arrangement.

The ruling was nevertheless provisional. A preliminary injunction tests the SEC’s likelihood of success and the need to preserve the existing position; it is not a final judgment after trial. Judge Castel also stated that Telegram had not waived its extraterritoriality defense for the ultimate merits of the case.

What remained unresolved on April 1

Telegram’s appeal was pending, and the underlying litigation had not produced a final judgment. The purchase agreements’ delivery deadline had already been extended to April 30, 2020, making the broad injunction an immediate obstacle to the planned launch.

Nothing in the April 1 record established whether the appeal would succeed, whether TON would launch under Telegram’s control, or what recovery purchasers might ultimately receive. Those outcomes remained unknowable from the event-day evidence.