Securities and Exchange Commission v. Telegram Group Inc.
- P. Castel
- 1:19-cv-09439
- U.S. District Court · Southern District of New York
- 2
In SEC v. Telegram Group Inc., the SEC asked Judge Castel to allow a later challenge to Telegram’s vagueness defense.
The SEC and the defendants, identified in the letter as Telegram Group Inc. and TON Issuer Inc.; the requested filing concerned the defendants’ vagueness defense involving Grams.
What happened
In Securities and Exchange Commission v. Telegram Group Inc., the SEC asked the court to let it file a motion challenging the defendants’ defense that the term “investment contract” was unconstitutionally vague. The request concerned the defendants’ private placement and future offers, sales, or distributions of Grams.
The SEC argued that Supreme Court and appellate decisions had provided clear guidance about “investment contracts.” It asked to file the challenge together with a possible motion for summary judgment, or alternatively requested a conference before filing the motion.
The letter reported that the defendants preferred handling the challenge with the SEC’s summary-judgment filing and suggested including it in the same brief. The text does not contain a ruling by Judge P. Kevin Castel on the request.
The detailed version
- Securities and Exchange Commission v. Telegram Group Inc. · No. 1:19-cv-09439
- P. Castel
- Nov. 26, 2019
Nature of the Document
This document is a letter from the Securities and Exchange Commission (SEC) to Judge P. Kevin Castel. It asks for permission to file a motion to strike the defendants’ affirmative defense that applying the term “investment contract” to Grams was unconstitutionally vague and gave insufficient notice. The document does not state that the court granted or denied the request.
Background
The SEC filed the action on October 11, 2019. The defendants filed an answer on November 12, 2019, asserting, among other defenses, that the definition of “investment contract” was unconstitutionally vague as applied to Telegram’s private placement and any future offers, sales, or distributions of Grams.
The SEC argued that the defense was legally insufficient because the Supreme Court’s decision in SEC v. W.J. Howey & Co. had provided guidance about “investment contracts” for more than seventy years. The SEC also cited decisions it said rejected vagueness challenges involving that term.
Requested Procedural Relief
Under Federal Rule of Civil Procedure 12(f), a court may strike an insufficient defense from a pleading. The SEC acknowledged that the ordinary deadline for such a motion had passed or would create a timing issue. It asked to file the proposed motion at the same time as any motion for summary judgment filed under the court’s scheduling order, while the court considered the SEC’s request for a preliminary injunction and other permitted motions. Alternatively, the SEC requested a pre-motion conference.
The letter states that the parties had met and conferred. According to the SEC, the defendants agreed that the proposed challenge should be considered with the SEC’s upcoming summary-judgment motion. The defendants proposed that the SEC include the challenge in its summary-judgment brief rather than file a separate motion. The SEC said that proposal was acceptable if the defendants did not oppose a brief of up to 35 pages, subject to the court’s approval, but the parties had not reached agreement on that condition.
Disposition
The provided text contains the SEC’s request and the parties’ reported positions, but no order or holding by Judge P. Kevin Castel. Accordingly, there is no stated disposition of the requested motion-to-strike procedure in this document.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.