Telegram has agreed to return more than $1.2 billion (972.84 million pounds) to investors and pay an $18.5 million civil penalty to resolve the US (SEC) Securities and Exchange Commission’s charges that the instant messaging platform’s unregistered offering of digital tokens called “Grams” violated the federal securities laws.
Meanwhile, the settlement ends a month’s long legal battle between the company and the regulator. In October 2019 the Security and Exchange Commission filed a complaint against Telegram alleging the company had raised capital through the sale of 2.9 billion Grams to finance its business. However, the SEC sought to enjoin Telegram from delivering the Grams it sold, which the regulator alleged were securities. In March, the U.S. District Court for the Southern District of New York agreed with the SEC and issued a preliminary injunction.
In May, Telegram announced that it was shutting down the Telegram Open Network (TON) initiative after a lengthy battle with the U.S. Securities and Exchange Commission (SEC). In its own announcement of the settlement the SEC differed with Durov’s assessment of its actions.
Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit said in a statement “New and innovative businesses are welcome to participate in our capital markets but they cannot do so in violation of the registration requirements of the federal securities laws”. She said adding “This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.”
According to the SEC, the argument from the regulator is that Telegram didn’t follow the rules. Had it worked with the regulator instead of launching the token offering without any oversight, the outcome might have been different.
Telegram Founder and CEO Pavel Durov said in May that “a US court stopped TON from happening” and he urged others to keep fighting the decentralisation balance and equality in the world. “You are fighting the right battle. This battle may well be the most important battle of our generations. We hope that you succeed where we have failed,” he said.
“Our emergency action protected retail investors from Telegram’s attempt to flood the markets with securities sold in an unregistered offering without providing full disclosures concerning their project,” said Lara Shalov Mehraban, associate regional director of the New York Regional Office. “The remedies we obtained provide significant relief to investors and protect retail investors from the future illegal offerings by Telegram.”