Telegram has been engaged in a long and expensive court battle with the United States Securities and Exchange Commission (SEC) following the $1.7 billion Grams initial coin offering (ICO). Now the court has brought down the hammer on Telegram via issuing a preliminary injunction which will prevent Telegram from distributing Grams tokens to ICO participants.

The Grams ICO occurred in 2018, well after the SEC had made it clear that any ICOs need to be registered with the SEC. The goal of the Grams ICO was to create a crypto and blockchain ecosystem centered around Telegram, which is one of the most popular messaging apps in the world.

However, a New York Federal Judge has decided that the SEC will likely be successful in proving that the Grams ICO was an illegal and unregistered sale of securities.

This preliminary injunction is needed in order to prevent Telegram from giving tokens to initial purchasers. That would lead to Grams tokens being traded on crypto exchanges and would be a further violation of securities laws.

The court case is not technically over, but inevitably Telegram is likely to lose. The standard protocol in these ICO cases is that the ICO issuer has to return all investor’s funds and register as a security. That could open up a major can of worms for Telegram if they don’t have all of the $1.7 billion anymore.

That being said, it could take months before the court case officially ends. So, Telegram does have some time to prepare for the final judgement.