Case 1:19-cv-09439-PKC Document 99 Filed 01/21/20 Page 1 of 144

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
------------------------------------x
SECURITIES AND EXCHANGE COMMISSION, :
: 19 Civ. 9439 (PKC)
Plaintiff, :
: ECF Case
-against- :
: Electronically Filed
TELEGRAM GROUP INC. and TON ISSUER :
INC., :
:
Defendants. :
------------------------------------x

PLAINTIFF’S RESPONSE AND COUNTER-STATEMENT

TO DEFENDANTS’ LOCAL RULE 56.1 STATEMENT,
IN OPPOSITION TO DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

Jorge G. Tenreiro
Kevin P. McGrath
Ladan F. Stewart
Alison R. Levine

Counsel for the Plaintiff

Securities and Exchange Commission
New York Regional Office
Brookfield Place
200 Vesey Street, Suite 400
New York, NY 10281
(212) 336-9145 (Tenreiro)

January 21, 2020

 Case 1:19-cv-09439-PKC Document 99 Filed 01/21/20 Page 2 of 144

TABLE OF CONTENTS

Page

I. Blockchains and Digital Currencies.....................................................................................1

A. Blockchains ..................................................................................................1

B. Digital Currencies ........................................................................................6

C. Problems with Current Blockchains and Their Cryptocurrencies .............10

II. Telegram Decides to Create a Better Blockchain ..............................................................11

A. Telegram and its Founders .........................................................................11

B. The TON Blockchain and Grams ..............................................................14

1. Features of the TON Blockchain ...............................................................18

2. Validation...................................................................................................25

C. Telegram Conducts a Private Placement ...................................................30

1. Round 1 of the Private Placement ..............................................................36

2. Round 2 of the Private Placement ..............................................................38

3. KYC Processes...........................................................................................39

(a) Lawson Conner KYC .....................................................................41

(b) Credit Suisse KYC .........................................................................41

(c) Rep Letters .....................................................................................41

D. The Private Placement Materials ...............................................................53

E. The Purchase Agreements..........................................................................62

1. Public Availability of the Private Placement Materials .............................75

III. Development of the TON Blockchain ...............................................................................77

A. The TON Foundation and TON Reserve ...................................................81

B. Contemplated Launch and Creation of Grams...........................................89

C. The TON Beta Version and Early Third Party Developments ..................90
i