The SEC filed an emergency action against the owners
and operators (the "Defendants") of a mobile messaging
application, requiring them to discontinue their allegedly illegal
offering of digital assets (the "Grams"). The defendants
asserted that Grams are intended to be a new virtual currency and,
thus, are not a "security."
In a proceeding before the U.S. District Court for the Southern
District of New York, the SEC argued that it was filing the
emergency action against the Defendants in order to prevent them
from "flood[ing]" the United States capital markets with
"billions" of Grams. According to the SEC, Grams are
securities because the initial purchasers expect to profit from the
Grams' eventual resale (as opposed to using them as currency).
Further, the SEC argued, although the Grams are being sold to
accredited investors in generally private transactions, the
Defendants have not taken any steps to prevent further
redistribution in the United States. As a
