Case 1:19-cv-09439-PKC Document 1 Filed 10/11/19 Page 1 of 31
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`Marc P. Berger
`Jorge G. Tenreiro
`Kevin McGrath
`SECURITIES AND EXCHANGE COMMISSION
`New York Regional Office
`200 Vesey Street, Suite 400
`New York, New York 10281-1022
`(212) 336-9145 (Tenreiro)
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`Email: TenreiroJ@sec.gov
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`SECURITIES AND EXCHANGE COMMISSION, :
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`Plaintiff, :
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`- against - :
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`TELEGRAM GROUP INC. and TON ISSUER INC.,
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`Defendants.
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`19 Civ. 9439 (PKC)
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`ECF Case
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`Complaint
`Jury Trial
`Demanded
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`Plaintiff Securities and Exchange Commission (“SEC” or “Commission”), for its
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`Complaint against Defendants Telegram Group Inc. and its wholly owned subsidiary TON Issuer
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`Inc. (together “Telegram” or “Defendants”), alleges as follows:
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`SUMMARY
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`1.
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`The SEC brings this emergency action to stop Defendants—owners and operators
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`of the mobile messaging application Telegram Messenger (“Messenger”)—from continuing their
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`ongoing illegal offering of digital-asset securities called “Grams.” This offering is occurring in
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`violation of the registration provisions of the federal securities laws. Defendants have committed
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`to flood the U.S. capital markets with billions of Grams by October 31, 2019 and may do so as
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`early as next week. Unless enjoined, Defendants will go forward without filing a registration
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`statement for the Grams as they are required to do under the Securities Act of 1933 (“Securities
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`Act”). In other words, Defendants plan to sell billions of securities that will quickly come to rest
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`in the hands of U.S. investors without providing those investors important information about
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`their business operations, financial condition, risk factors and management.
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`2.
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`Telegram’s illegal offering (the “Offering”) had an initial stage, which took place
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`between January and March 2018. During this stage, Telegram raised approximately $1.7 billion
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`from sales of approximately 2.9 billion Grams to 171 purchasers (the “Initial Purchasers”). A
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`large portion of this capital came from U.S. investors: Telegram sold more than 1 billion Grams
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`to 39 U.S. Purchasers, raising $424.5 million from the U.S. market. Telegram is using the
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`proceeds of this initial offering to capitalize its business and finance the creation of its
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`blockchain—the “Telegram Open Network” or “TON Blockchain.”
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`3.
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`Grams are securities because the Initial Purchasers and subsequent investors
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`expect to profit from Telegram’s work: the development of a TON “ecosystem,” integration
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`with Messenger, and implementation of the new TON Blockchain. Grams are not a currency
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`because, among other things, there are not any products or services that can be purchased with
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`Grams. Rather, there is an expectation on the part of investors that they will profit if Telegram
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`builds out the functionalities it has promised.
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`4.
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`Telegram committed to deliver Grams to the Initial Purchasers in conjunction
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`with the launch of the TON Blockchain by no later than October 31, 2019 and it plans to sell
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`millions of additional Grams at the same time. As of October 11, 2019, Telegram has not filed a
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`registration statement with the SEC for this planned offering of securities.
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`5.
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`Once Telegram delivers the Grams to the Initial Purchasers, they will be able to
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`resell billions of Grams on the open market to the investing public. Telegram and/or its affiliates
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`will facilitate these sales on digital-asset trading platforms. Once these resales occur, Telegram
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`will have completed its unregistered offering with billions of Grams trading on multiple
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`platforms to a dispersed group of investors.
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`6.
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` Sections 5(a) and 5(c) of the Securities Act require that an issuer of securities like
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`Telegram register its offers and sales of securities with the SEC. Telegram failed to file a
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`registration statement and plans to sell billions of Grams to investors without providing them the
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`type of basic information about the nature of the investment being offered, information that is
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`included in hundreds of registration statements that are filed with the SEC every year.
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`7.
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` Unless enjoined, Telegram’s completion of the Offering will allow it to have
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`circumvented the Securities Act’s registration requirements, leaving U.S. investors to buy and
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`sell Grams without the vital information about those securities and about Telegram that Congress
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`intended registration to provide.
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`8.
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`Once Grams reach the public markets, it will be virtually impossible to unwind
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`the Offering, given that many purchasers’ identities will be shrouded in secrecy, and given the
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`variety of unregulated markets where Grams may be sold, including platforms that promise
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`anonymity and encryption capability to mask transactions. Accordingly, a temporary restraining
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`order and preliminary injunction are necessary to prevent the imminent delivery of Grams to the
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`Initial Purchasers (who are likely to promptly resell millions of them into the public markets) and
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`to prevent Defendants from offering, selling, transferring, or otherwise distributing or delivering
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`Grams to any other persons and entities absent registration pursuant to the securities laws.
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`VIOLATIONS
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`9.
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`By engaging in the conduct set forth in this Complaint, Defendants engaged in
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`and are engaging in the unlawful sale and offer to sell securities in violation of Sections 5(a) and
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`5(c) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c)].
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`10.
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`Unless the Defendants are permanently restrained and enjoined, they will
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`continue to engage in the acts, practices, and courses of business set forth in this Complaint and
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`in acts, practices, and courses of business of similar type and object.
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`NATURE OF THE PROCEEDING AND RELIEF SOUGHT
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`11.
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`The Commission brings this action pursuant to the authority conferred upon it by
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`Section 20(b) of the Securities Act [15 U.S.C. § 77t(b)].
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`12.
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`The Commission seeks, as immediate relief:
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`(1) a temporary restraining order and a preliminary injunction against Defendants
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`prohibiting them from participating in any offerings of unregistered securities or otherwise
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`violating Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. §§ 77e(a), 77e(c)], including
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`but, not limited to, by distributing Grams to any persons;
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`(2) an order permitting the Commission to conduct expedited discovery and prohibiting
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`Defendants from destroying or altering documents; and
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`(3) an order permitting service by alternative means, including service on Defendants’
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`counsel in the underlying investigation by email.
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`13.
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`The Commission also seeks a final judgment: (a) permanently enjoining the
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`Defendants from engaging in the acts, practices, and courses of business alleged herein; (b)
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`ordering Defendants to disgorge their ill-gotten gains and to pay prejudgment interest thereon;
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`(c) prohibiting Defendants, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C.
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`§ 78u(d)(5)], from participating in an offering of digital securities; and (d) imposing civil money
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`penalties on Defendants pursuant to Section 20(d) of the Securities Act [15 U.S.C § 77t(d)].
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`JURISDICTION AND VENUE
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`14.
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`This Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 and
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`Sections 20(b), 20(d), and 22 of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v].
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`Defendants, directly or indirectly, have made use of the means or instruments of transportation or
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`communication in, and the means or instrumentalities of, interstate commerce, or of the mails, in
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`connection with the transactions, acts, practices, and courses of business alleged herein.
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`15.
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`Venue is proper in the Southern District of New York pursuant to Section 22(a) of
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`the Securities Act [15 U.S.C. § 77v(a)]. Among other acts, Defendants sold the securities at
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`issue in this case to purchasers with domiciles in this District, and also directed payments of
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`funds denominated in U.S. dollars through a correspondent bank in this District.
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`DEFENDANTS
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`16.
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`Telegram Group Inc. is a privately owned British Virgin Islands company with
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`its principal place of business in Dubai, United Arab Emirates. Its primary product is
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`Messenger, an encrypted messaging application with approximately 300 million monthly users
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`worldwide that has been called the “cryptocurrency world’s preferred messaging app.”
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`17.
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`TON Issuer Inc. is a British Virgin Islands company, wholly owned by Telegram
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`Group Inc., with its principal place of business in Tortola.
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`RELATED INDIVIDUALS AND ENTITY
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`18.
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`Pavel Durov, age 35, is a Russian and St. Kitts and Nevis citizen, and the co-
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`founder, 100% owner, and CEO of Telegram Group Inc. In 2006, he founded a website called
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`“VKontakte” or “VK,” a social networking site similar to Facebook that later became the largest
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`Europe-based social network. Pavel is a self-described “outspoken libertarian” who “published
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`free market manifestos urging the Russian government to deregulate” the economy. After a
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`clash with the government in 2014, Pavel lost ownership of and control over VK and left Russia.
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`19.
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`Dr. Nikolai Durov, age 39, is a Russian citizen, the co-founder, co-owner, and
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`Chief Technology Officer of Telegram Group Inc., and Pavel Durov’s brother.
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`20.
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`TON Foundation is company that has been or is about to be incorporated as a
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`Cayman Islands limited liability company. The TON Foundation’s stated mission is to “promote
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`and support the TON Blockchain” and includes management of Grams distributed to the TON
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`Foundation by Defendant TON Issuer. Pavel and Nikolai Durov will be or are the sole members
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`of the TON Foundation’s board.
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`STATUTORY FRAMEWORK
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`21.
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`Congress enacted the Securities Act of 1933 (“Securities Act”) to regulate the
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`offer and sale of securities. In contrast to ordinary commerce, Congress enacted a regime of full
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`and fair disclosure, requiring those who offer and sell securities to the investing public to provide
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`sufficient, accurate information to allow investors to make informed decisions before they invest.
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`Registration statements relating to an offering thus provide public investors with financial and
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`managerial information about the issuer and the risks and trends that would affect the enterprise.
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`22.
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`Section 5(a) of the Securities Act [15 U.S.C. § 77e(a)] provides that, unless a
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`registration statement is in effect as to a security or an exemption from registration applies, it is
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`unlawful for any person, directly or indirectly, to sell securities in interstate commerce. Section
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`5(c) of the Securities Act [15 U.S.C. § 77e(c)] provides a similar prohibition against offers to sell
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`or offers to buy, unless a registration statement has been filed or an exemption from registration
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`applies. Thus, Sections 5(a) and 5(c) of the Securities Act prohibit the unregistered offer or sale
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`of securities in interstate commerce absent an exemption. These prohibitions apply to a
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`“distribution” of securities, the entire process by which, in a public offering, a block of securities
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`is dispersed and ultimately comes to rest in the hands of the investing public.
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`23.
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`The registration statements contemplated by the Securities Act require disclosures
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`that provide the public with the information necessary to make an informed investment decision.
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`Disclosures in a registration statement typically require items of information concerning
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`financial and managerial information about the issuer of the securities, details about the terms of
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`the securities offering, the proposed use of investor proceeds, and an analysis of the risks and
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`material trends that would affect the enterprise. They also impose on issuers a duty periodically
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`to update this information.
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`24.
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`For example, Item 3 on a Form S-1 registration statement calls for management’s
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`assessment of significant factors that make the offering speculative or risky. In addition, Rule
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`421(d) of Regulation S-K requires plain English disclosure (important for unsophisticated
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`investors in a nascent or unproven tech innovation) [17 C.F.R. § 230.421(d)]. Finally, Sections
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`11 and 12 of the Securities Act [15 U.S.C. §§ 77k, 77l] impose strict liability on the issuer and
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`underwriters of securities for false statements in registration statements.
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`25.
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`Section 5 of the Securities Act, by its terms, is all embracing; it prohibits any
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`unregistered securities offering. Through exemption provisions like Section 4 of the Securities
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`Act [15 U.S.C. § 77(d)], however, Congress distinguished between (1) those transactions that
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`occur during the process by which securities are distributed to the public in an offering that
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`emanates from the issuer of the securities, and (2) subsequent trading transactions in the market
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`by investors once the securities have come to rest with investors.
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`26.
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`In drawing this distinction between distributions and trading, Congress sought to
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`provide the protections afforded by registration both where securities are sold to the public by
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`the issuer, and where they are publicly sold through an intermediary who buys the stock from the
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`issuer with a view to public resale, defined as “underwriters.” 15 U.S.C. § 77b(a)(11). Congress
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`enacted a broad definition of underwriter to include all persons who might operate as conduits
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`for securities being placed into the hands of the investing public.
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`27.
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`A distribution by issuers and/or underwriters is not exempt under Section 4 and
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`requires registration unless some other exemption or safe harbor applies. The exemptions and
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`safe harbors are structured to exempt transactions where the purpose and protections of
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`registration have been otherwise satisfied. The party claiming that a distribution is entitled to an
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`exemption bears the burden of claiming the exemption.
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`28.
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`The definition of a “security” includes a wide range of investment vehicles,
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`including “investment contracts.” Investment contracts are instruments through which an
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`individual invests money in a common enterprise and reasonably expects profits or returns
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`derived from the entrepreneurial or managerial efforts of others. In a variety of circumstances,
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`courts have found that novel or unique investment vehicles constitute investment contracts,
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`including interests in orange groves, animal breeding programs, railroads, airplanes, mobile
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`phones, and enterprises existing only on the Internet. As the U.S. Supreme Court has noted,
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`Congress defined “security” broadly to embody a “flexible rather than a static principle, one that
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`is capable of adaptation to meet the countless and variable schemes devised by those who seek
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`the use of the money of others on the promise of profits.”
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`BACKGROUND ON DIGITAL TOKENS
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`29.
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`The term “digital asset” or “digital token” generally refers to an asset that is
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`issued and transferred using distributed ledger or blockchain technology, including, but not
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`limited to, so-called “cryptocurrencies,” “coins,” and “tokens.”1 Entities have offered and sold
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`digital tokens in fundraising events, often called “ICOs,” in exchange for consideration.
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`30.
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`Generally, digital tokens may entitle holders to certain rights related to a venture
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`underlying the fundraising event, such as rights to profits, shares of assets, rights to use certain
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`services provided by the issuer, and/or voting rights. These digital tokens may also be traded on
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`digital-asset trading platforms where they are tradeable for other digital assets or fiat currency.
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`The coins or tokens are often tradeable upon delivery to investors.
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`31.
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`Issuers of digital tokens typically release a “whitepaper” or marketing materials
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`describing the project and the terms of the issuance. To participate, investors typically transfer
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`funds to the issuer’s accounts. After the completion of the issuance, the issuer will deliver its
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`unique token to the participant’s unique address on a distributed ledger or blockchain.
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`32.
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`In some instances, the digital tokens may continue to be sold by the issuer. In
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`others, they may only be obtained after issuance by purchasing them in secondary markets.
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`33.
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`On July 25, 2017, the SEC issued what is often called the “DAO Report,”
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`advising “those who would use . . . distributed ledger or blockchain-enabled means for capital
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`raising, to take appropriate steps to ensure compliance with the U.S. federal securities laws,” and
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`finding that the offering of digital assets at issue in that report were investment contracts.
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`1
`A blockchain or distributed ledger is a peer-to-peer database spread across a network, that
`records all transactions in theoretically unchangeable, digitally recorded data packages. The
`system relies on cryptographic techniques for secure recording of transactions. Blockchains or
`distributed ledgers can also record “smart contracts,” essentially computer programs designed to
`execute the terms of a contract when certain triggering conditions are met.
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`FACTS
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`A.
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`The Durovs Create Telegram Messenger and Plan a Public Offering of Grams
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`34.
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`The Durovs launched a beta version of Telegram Messenger in late 2013,
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`capitalizing the project with funds from Pavel and a private, Buffalo, New York-based investor.
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`Telegram, however, does not make money from Messenger and has “declared not-for-profit”
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`goals. Telegram tells potential users before they download Messenger that “Telegram is free and
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`will always be free” and that Telegram is “not going to sell ads or introduce subscription fees.”
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`35.
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`Telegram also informs Messenger users that Telegram “take[s] your privacy
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`seriously and will never give third parties access to your data.” For example, Telegram promotes
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`the “Secret Chats” of Messenger, which allows users to “send all types of disappearing content,”
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`and employs an infrastructure that synchronizes “encrypted data across multiple independent
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`server[s] . . . spread across different continents and jurisdictions.” Telegram similarly boasts that
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`it has “disclosed 0 bytes of user data to third parties, including governments.”
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`36. Messenger has become a ubiquitous messaging application for the cryptocurrency
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`community. Telegram estimates that at least 500,000 new users join Messenger daily and recent
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`estimates suggest that Telegram now has 300 million monthly users and that more than 84% of
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`projects involving blockchain technology have an active community of Messenger users.
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`Because of the privacy protections embedded in the service, Messenger has also been cited as a
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`popular messaging app for individuals engaged in illicit activities.
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`37.
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`Although Messenger incorporates ad hoc functionality that lets users exchange
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`goods and services for both fiat and digital currency, Telegram wished to integrate the ability
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`seamlessly to exchange digital assets directly into Messenger. The Durovs concluded, however,
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`that existing networks such as the Bitcoin and Ethereum blockchains do not have the capability
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`to replace high-volume transaction mechanisms like credit cards and fiat currency.
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`38.
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`In late 2017, Telegram announced its intent to introduce “next-generation multi-
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`blockchain” systems “designed to host a new generation of cryptocurrencies and decentralized
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`applications, at a massive scale.” Telegram described this yet-to-be-created “Telegram Open
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`Network” or “TON,” as “an always expanding and contracting decentralized supercomputer and
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`value transfer system.” Telegram solicited investments to fund TON’s launch.
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`39.
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`Telegram’s decision to raise funds in the Offering coincided with a dramatic
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`uptick in the number of “Initial Coin Offerings” (“ICOs”), fundraising events in which an entity
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`offers participants a unique digital asset in exchange for consideration (most commonly Bitcoin,
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`Ether, or fiat currency), and with increased market discussion of outsized returns obtained in
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`ICOs. One service reported that at least 343 ICOs occurred in 2017, up from 43 the year prior.
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`40. Moreover, during that time, the overall demand for digital tokens and assets had
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`significantly increased, and investors were aware that older digital assets (such as Bitcoin) had
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`dramatically risen in price, generating monumental returns. The market was also aware of the
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`increasing popularity and adoption of Messenger.
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`B.
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`Telegram Begins Its Intended Offering of Grams to the Public with Unregistered
`Offers and Sales of Billions of Grams to Initial Purchasers
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`41.
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`From January through March 2018, Telegram entered into Gram Purchase
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`Agreements with the Initial Purchasers. Under the agreements, TON Issuer Inc., a wholly-
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`owned subsidiary of Telegram Group Inc., would “issue a new cryptocurrency called ‘Grams’
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`. . . following the development and launch of a new blockchain platform” called the “TON
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`Network.” The Initial Purchasers, in turn, “subscribe[d]” to Grams by buying them at fixed
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`prices, and Telegram committed to deliver them after the development of the TON Blockchain.
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`42.
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`The Gram Purchase Agreements set October 31, 2019, as the “Deadline Date” for
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`Telegram to fulfill its obligations to create a working blockchain and deliver Grams. If Telegram
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`fails to meet the Deadline Date, the Gram Purchase Agreements entitle the Initial Purchasers to
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`reimbursement of their investment minus any expenses. Importantly, this contractual deadline is
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`not tied to any promise or guarantee that Grams could actually be used to buy goods and services
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`and depends solely on Telegram’s ability to create and launch the TON Blockchain.
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`43.
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`44.
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`In early 2018, Telegram accepted Euros and Dollars in exchange for Grams.
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`Telegram’s unregistered offers and sales of Grams to Initial Purchasers occurred
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`in two phases. Telegram sold approximately 2.3 billion Grams in the first phase (“Round One”),
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`raising $850 million, and another approximately 639 million Grams in the second phase (“Round
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`Two”), raising another $850 million, for a total of nearly 2.9 billion Grams sold in exchange for
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`$1.7 billion. Of the nearly 2.9 billion Grams sold, more than one billion were sold to United
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`States purchasers, who invested a total of $424.5 million.
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`45.
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`The prices at which Telegram has sold and will sell Grams during the Offering are
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`predetermined based on a formula that Telegram created (the “Formula”), as explained below in
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`paragraph 87. Under the Formula, Round One purchasers paid $0.37 per Gram and Round Two
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`purchasers paid $1.33 per Gram. The “Reference Price” of Grams at launch is $3.62.
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`46.
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`Telegram has not prepared or filed any registration statement with respect to any
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`Grams it has offered or sold, or intends to offer or sell in the Offering, and no registration
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`statement has ever been in effect with respect to any Grams.
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`47.
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`The Gram Purchase Agreements did not contain information about Telegram’s
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`financial history or ability to generate profits, and purchasers who may buy or receive Grams
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`will not receive any document containing information about Defendants’ operations, financial
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`condition, or other factors relevant in considering whether to invest in Grams. Nor will they
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`receive information about how the Durovs are being compensated as a result of the Offering.
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`48.
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`Because Telegram did not register the Offering, investors in Grams will be
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`deprived of material information relating to their investment. Defendants essentially seek to
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`obtain the benefits of a registered public offering without assuming the disclosure responsibilities
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`and legal strictures designed to protect the investing public.
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`49.
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`Telegram has taken the position that the Gram Purchase Agreements were
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`investment contracts, i.e., securities, and placed a restrictive legend on the Gram Purchase
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`Agreements. The legend warned United States residents that “the offer and sale of this security
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`has not been registered under the U.S. Securities Act of 1933” and “may not be offered, sold or
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`otherwise transferred . . . except pursuant to an effective registration statements.”
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`50.
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`Telegram, however, claimed that Grams, the heart of the Gram Purchase
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`Agreements, without which the agreements have no value or purpose, were not securities but
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`rather currency. Telegram thus placed no restrictive legends on any Grams, nor were purchasers
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`advised that they may not sell Grams in the United States absent a registration statement.
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`Purchasers of Grams are not restricted from reselling them to others, other than as provided for
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`by certain contractual lockups placed on some Grams sold to Initial Purchasers.
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`51.
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`As set forth in more detail below, however, Grams are investment contracts.
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`Based on Telegram’s own promotional materials and other acts, a reasonable purchaser of Grams
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`would view their investment as sharing a common interest with other purchasers of Grams as
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`well as sharing a common interest with Defendants in profiting from the success of Grams. The
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`fortunes of each Gram purchaser were tied to one another and to the success of the overall
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`venture, including the development of a TON “ecosystem,” integration with Messenger, and
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`implementation of the new TON Blockchain. Investors’ profits were also tied to Telegram’s
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`profits based on Telegram’s significant holdings of Grams.
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`52.
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`The Gram Purchase Agreements for Round One instituted smart contract-
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`enforced “lock-up periods” during which purchasers could not offer, sell, or contract to sell
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`Grams. Specifically, Round One purchasers agreed that they could not, without Telegram’s prior
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`written consent, offer, sell, or contract to sell Grams that they purchased except in a series of
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`25% tranches starting three months, six months, twelve months, and eighteen months after they
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`received Grams. Round Two Gram Purchase Agreements included no such restrictions.
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`53.
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`However, Grams were and continue to be investment contracts from which Initial
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`Purchasers and others reasonably expect to reap enormous profits once the Gram market
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`launches. Grams are not a currency because they have no realistic currency uses at this time.
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`54.
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`Telegram sold and will deliver Grams in amounts that far exceed any anticipated
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`“use” on the TON Blockchain. For example, all but three of the United States Grams Initial
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`Purchasers bought more than 2.5 million Grams each. Nor did or will Telegram restrict sales
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`only to individuals who would actually “use” Grams. To the contrary, Telegram contemplated
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`that Initial Purchasers would resell their Grams immediately upon delivery, as evidenced by its
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`inclusion of certain lock-up provisions as to some Grams.
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`55. Moreover, the $1.7 billion raised in the Offering so far exceeds what Defendants
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`project they will need to develop the TON Blockchain. Indeed, Defendants stated in offering
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`documents that the funds raised would be used for both Messenger and development of the TON
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`Blockchain, estimating that Telegram would spend $520 million—or one-third of the funds
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`raised—on Messenger alone between 2019 and 2021.
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`56.
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`As of January 31, 2019, Defendants had used approximately $218 million of the
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`$1.7 billion raised to support the development of Messenger and the TON Blockchain. Investors
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`Case 1:19-cv-09439-PKC Document 1 Filed 10/11/19 Page 15 of 31
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`in Grams do not exercise control over how the proceeds of the Gram sales will be spent;
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`Telegram possesses sole discretion to decide how to do so.
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`C.
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`Telegram Is Distributing Grams by Leading Investors to Expect Opportunities to
`Profit from Grams, Including Profits Derived from the Entrepreneurial or
`Managerial Efforts of Telegram
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`57.
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`Telegram emphasized to investors, and some Initial Purchasers stated in
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`communications that they understood, that Telegram, Messenger, and the Durovs were integral
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`to the success of the TON Blockchain project and Grams.
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`58.
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`In addition to private conversations between Pavel and potential purchasers,
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`including purchasers in the United States, Telegram used certain “Offering Documents” to
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`market, offer, and sell Grams in the Offering. The Offering Documents consisted of:
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`
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`two-page and four-page “Teasers” created sometime before the end of 2017;
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` at least two versions of the “Primers” authored by Pavel Durov, varying between twenty-
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`three and twenty-six pages in length—an undated primer created before the end of 2017
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`(the “2017 Primer”), and the other, entitled “Pre-Sale Primer,” dated as of January 18,
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`2018 (the “2018 Primer”);
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` at least two versions of the “Whitepaper,” one dated December 3, 2017 and the other
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`January 18, 2018, a 130-plus page technical document authored by Dr. Durov; and
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` at least two versions of an “IOI” sheet entitled “Telegram – Indication of Interest.”
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`59.
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`From the beginning of the Offering, potential purchasers received and read the
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`various Offering Documents. Pavel himself forwarded the 2017 Primer to an individual in
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`California, and other Telegram employees distributed the Whitepaper and Primers to potential
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`Initial Purchasers, including in the United States (the Whitepaper, Primers, and Teasers
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`subsequently were intentionally leaked as a part of the Offering and can currently be found on
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`15
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`Case 1:19-cv-09439-PKC Document 1 Filed 10/11/19 Page 16 of 31
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`the Internet). Pavel and Initial Purchasers signed versions of the IOI, including one with a
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`potential purchaser who signed with an address in this District.
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`60.
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`Throughout this period, Pavel marketed the sale of Grams himself, using business
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`and other contacts to solicit investments and spread the word about the impending Offering.
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`Telegram Has Led Gram Purchasers to Reasonably Believe that Their Purchase of Grams
`Constituted an Investment into a Common Enterprise
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`61.
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`The Gram Purchase Agreements themselves explained that the funds raised by the
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`sale of Grams would be committed to “development and launch of the TON Network.”
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`62.
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`In the Offering Documents and in conversations Pavel had with the Initial
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`Purchasers, Telegram led purchasers to expect that Defendants would use the Offering proceeds
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`to finance Defendants’ businesses and that Defendants and their founders would have a stake in
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`these endeavors both because they were holding Grams and because of the inextricable
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`connection between Grams and Messenger.
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`63.
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`For example, the four-page Teaser stated that Telegram was “launching a token
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`sale” in Q1 2018 “[t]o obtain the resources required to make TON a reality,” and that Telegram
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`would sell up to 44% of the five billion available Grams for that purpose. Telegram also stated
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`that the remaining Grams would be reserved for its development team and the “TON Reserve,”
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`which would use Grams to “allow for a fast and stable evolution of the platform” after its launch.
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`64.
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`The 2017 Primer described Telegram’s need for “about $620 million to support
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`continuing org