Telegram Agrees to Return $1.2B to Investors and Pay $18.5M Civil Penalty

telegram charged by SEC

Telegram Group has agreed to return $1.2 billion to investors, as well as to pay a $18.5 million civil penalty to settle charges over an unregistered offering of digital tokens known as “Grams”, according to the U.S. Securities and Exchange Commission (SEC).

The SEC sued Telegram back in October 2019 and blocked its $1.7 billion raised during a digital token offering. The messaging service company raised money to fund its operations by selling $2.9 billion worth of Grams to investors around the world. 

In its statement on Friday, the SEC said it obtained judicial authorization for the settlements. Telegram neither admitted nor denied the accusations. The SEC said that initial coin offerings are considered securities offerings and that’s why they should be bound by the agency’s offering rules, which demands from companies to submit registration and disclosure documents. 

The agency hasn’t been holding back when it comes to the regulation of the crypto industry. It ordered Telegram to notify the agency before launching any new digital assets over the next three years. 

“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,” said Kristina Littman, president of the SEC Enforcement Division’s cyber division. 

“This settlement requires Telegram to return funds to investors, imposes a significant penalty, and requires Telegram to give notice of future digital offerings.”

Telegram missed a deadline to roll out its TON platform because of a court order, and therefore had to pay back the funds to investors, the company said. It added that it had already repaid $1.2 billion to investors through loans or directly. 

“We hope the regulatory environment for blockchain technology in the US becomes more favorable for others in the future,” Telegram said. While the company apparently doesn’t plan to develop the code for its blockchain project, TON, it noted that “some minor bug fixes and Github issue answers may occasionally appear if any of the members of the original team have the spare time and inclination to contribute to the community’s efforts.”

However, the majority of the TON code has been released, including blockchain nodes, its own crypto wallet, as well as a technical paper on the platform’s consensus protocol. The company abandoned plans to develop TON any further, however, another group known as TON Labs, rolled out its own version of the platform. Apparently, TON Laps is a startup that helped Telegram test the platform. 

In a post published on Telegram founder and majority owner Pavel Durov’s Telegram channel, the messaging company stated that the arrangement reconfirmed their commitment to return the money to investors.

“Since we saw limited value in pursuing the court case further, we welcomed the opportunity to resolve it without admitting or denying our liability,” Telegram said in the statement. The SEC refused to talk about the settlement with Telegram, but noted in a letter to the court that the proposed arrangement is “fair and reasonable”.