The US Securities and Exchange Commission has filed a lawsuit against Telegram, the encrypted instant messaging and voice app.

The US Securities and Exchange Commission announced on Friday that it has received an injunction against the messaging app and a subsidiary, TON Issuer Inc. Telegram had promised to distribute tokens to investors by October 31st.

"Today's emergency measure is designed to prevent Telegram from flooding the US markets with digital tokens we deem illegal," said Stephanie Avakian, co-director of the SEC enforcement division, in a statement.

Markus Ra, a telegraph representative and lawyer of the company, did not immediately respond to the request for comment.

In a lawsuit in New York, Telegram, a company owned by Russian entrepreneur Pavel Durov, argued that the "gram" tokens sold to investors in 2018 were more currency than securities.

The SEC rejected the argument by claiming that Telegram "caused investors to expect them to make substantial profits" when buying tokens. "Telegram touted a readily available trading market for grams," said the lawsuit.

Silicon Valley investors, including Benchmark and Kleiner Perkins Caufield & Byers, had signed up for what was considered the largest ICO to date.

Telegram had announced that the proceeds would be used to create a "blockchain network project" that would allow developers to create new applications for the service

Similar to Facebook's Libra token, Telegram provided that Grams would be a new way for people to make digital payments and cash transfers.

The lawsuit against Telegram came on Friday when five companies left the Facebook project Libra, which was scrutinized by legislators and regulators in the US and Europe.

In just three months in early 2018, according to the SEC's complaint, Telegram obtained $ 1.7 billion from the sale of 2.9 billion grams to just 171 investors. About 424.5 million USD were raised by 39 US-based investors, it said.

The SEC's action is the latest example of continued action against alleged illicit securities offers in the cryptocurrency industry.

In recent years, the regulator has taken an uncompromising position in the sale of tokens, rejecting salespeople's argument that the federal law on the sale of shares was inapplicable to them.

"We have repeatedly stated that issuers can not circumvent federal securities law by labeling their product as a cryptocurrency or digital token," said Steven Peikin, also co-director of SEC enforcement.

"Telegram is trying to capitalize on the benefits of a public offer without respecting the long-standing disclosure requirements of protecting the investing public," he added.

The SEC has attempted to distinguish between cryptocurrencies for purchases and tokens, which in their view are more likely to correspond to a capital increase.

At the beginning of this year, letters were sent to two companies outlining the characteristics of a token sale that could not be considered as an offer of securities, including the fact that the tokens could not be immediately resold profitably.