Who exactly is the SEC protecting when they come out with their enforcement actions?
They claim it is to protect investors of schemes that violate securities laws in one way or another.
However, who exactly were they protecting when it comes to the Telegram outcome?
If you do not recall, Telegram had been in a lengthy legal battle with the SEC over their issuance of GRAM tokens via an ICO several years back.
Telegram issued the majority of these tokens to accredited investors and those investing from overseas.
The GRAM token was also said to be a utility token of sorts as it would be the native token on the Telegram Open Network.
It all sounds like a reasonable idea and project, that is until the SEC got involved.
You would think the SEC might levy a fine and make the company return any investments it received from non-accredited investors located inside the United States as that does in fact violate securities laws.
However, the SEC went so far above that, it's ridiculous.
They required Telegram to return the investments to all investors and shut the project down.
The reason?
Because even if the project were to launch, it's feasible that US based users and investors could gain access to the platform and its native GRAM tokens, which were labeled a security.
And in some round about way, that too violates securities laws.
The crazy part is that they are making Telegram return funds to investors outside the United States. In what world does the SEC get to decide securities laws for the rest of the planet?!
Last time I checked they were an American Regulator, and that's it.
More about this particular case can be seen here:
https://cointelegraph.com/news/breaking-telegram-abandons-telegram-open-network-and-gram-tokens
Hester Peirce at the SEC asked that very same question in her Blockchain Week Singapore address...
“Who did we protect by bringing this action? The initial purchasers, who were accredited investors? The members of the public, many of whom are outside the United States, who would have bought the Grams and used them to buy and sell goods and services on the TON Blockchain? Did they really look to U.S. securities laws for protection? Would-be innovators, who will now take additional steps to avoid the United States?”
(Source: https://www.sec.gov/news/speech/peirce-not-braking-and-breaking-2020-07-21)
I couldn't have said it better myself!
Who exactly did they protect with this enforcement action?
This is just one in a long line of questionable decisions be the SEC done in the name of "protecting investors".
They are very active in the US penny stock markets as well and when a company violates some securities law, often without even knowing, the SEC will suspend trading of the stock for a brief period.
Once that period ends, the stock will be de-listed from whatever over the counter exchange it was trading on previously.
It will be moved to the grey-markets where no market makers are allowed to make a market in it.
As you can imagine this kind of move hurts the stock price dramatically.
Usually once the stock opens from the trading suspension on the grey-markets, it is 90% lower in value.
Over the following days and weeks it usually proceeds to lose the rest of its value.
Investors holding the stock often lose 90% (if they are able to sell on the first day the stock re-opens post suspension) or they lose 100% of the value as the stock languishes on the grey market, never to be heard from again.
The old saying among investors is that stocks go to the grey market to die.
And that is all due to the actions of an SEC who's stated goal is to protect investors.
Investors typically lose 90% or more of their investment any time the SEC gets involved.
It seems like there could be a better way of doing this Mr. Regulator...
Stay informed my friends.
-Doc
