
Reading Between the Lines: SEC, Telegram, and Rule 144 - todsacerdoti
https://a16z.com/2020/02/22/reading-between-the-lines-sec-telegram-and-rule-144/
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officialchicken
Note that a16z is an RIA now - not a VC anymore. Recent news stories tell of
them planning on investing up to $1B in crypto. As an RIA, they can make
riskier investments.

Here is the governments claim (3):

"Grams are securities because the Initial Purchasers and subsequent investors
expect to profit from Telegram’s work: the development of a TON “ecosystem,”
integration with Messenger, and implementation of the new TON Blockchain."

TON failed the Howey test by their offering in the US markets and - this is
the critical part not mentioned - they refused to acknowledge or respond to
the SEC. Full-stop, end of story. The courts can start to wrap it up on April
30.

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JumpCrisscross
> _As an RIA, they can make riskier investments_

Less liquid. Not necessarily riskier. RIAs also have more reporting
requirements and liabilities to their investors than private funds like VCs.

> _they refused to acknowledge or respond to the SEC_

Can’t imagine this thrilled their investors.

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dathinab
> Because if the SEC’s interpretation stands, any purchaser of a security
> issued by a non-public company could be deemed to be an underwriter.

As very non-knowledgeable person in this are I believe this is where the
argument falls apart.

The interpretations is specific to Gram tokens, not "a [arbitrary] security
issued by a non-public company".

I.e. it's about the "innate" nature of this specific security (Gram token),
which is different to e.g. the security normally involved in VC.

_At least if it's not VC business mean to "scam" later investors, in which
case it very well could apply._ (And probably should?)

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yellow_lead
I'm also not knowledgeable in this area, but I agree with you. Would love to
see an unbiased legal expert's opinion. Definitely feels like a stretch to me
though, as you've pointed out.

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m0zg
It must be extremely frustrating for the VC firms to be cut out of the "next
Whatsapp" entirely. In the unlikely event that Telegram prevails, it's not
entirely clear why venture investment would even be needed in a lot of cases.
The "network" would still be valuable, but I think it can be purchased for a
lot less.

I'd much prefer a 100% transparent, cryptographically verifiable ownership
contract to an impenetrable maze of the usual one sided legalese you will find
in equity contracts.

I'm not a VC, though. I'm sure VCs would much prefer the opposite: for things
to remain just as they are now. Regulatory capture is a powerful thing.

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wmf
Weren't most of the buyers of the TON/Gram pre-ICO VCs? They're not cut out at
all.

More generally, there's no reason why entrepreneurs would refuse investment
from good VCs. I can imagine scammers would want to lock out VCs to avoid
scrutiny, but real businesses shouldn't.

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m0zg
VCs don't just buy small chunks of companies. They normally also buy influence
and (often) preferential treatment, which they don't get if they just buy into
an ICO.

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ur-whale
Not entirely sure why the SEC even has jurisdiction here ... isn't Telegram
based outside of the US?

And even if they decide they do have jurisdiction, how are they going to
enforce anything?

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dathinab
It would affect US buyers or more concrete re-sellers of Gram tokens. Given
that you normally buy this kind of tokens to either trade them or keep them as
a security you sell when you need money it matters a lot.

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Reelin
Wouldn't it only prevent formal legal entities (ie US companies) from making
purchases? End users could trivially purchase via non-US payment services, and
I don't see how the US could actually prevent "import" or use of crypto tokens
in practice.

To me, it seems similar to the way the GDPR claims to apply to entities which
don't operate in the EU - good luck enforcing that in practice!

