Pavel Durov’s grand cryptocurrency goals for his Telegram messaging service are ending with an $18.5 million civil settlement with the U.S. Securities and Exchange Commission and a pledge to return the greater than $1.2 billion that traders had put into its TON digital token.
The settlement ends a months lengthy authorized battle between the corporate and the regulator. In October 2019 the SEC filed a criticism in opposition to Telegram alleging the corporate had raised capital via the sale of two.9 billion Grams to finance its enterprise. The SEC sought to enjoin Telegram from delivering the Grams it bought, which the regulator alleged have been 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 introduced that it was shutting down the TON initiative.
Telegram abandons its TON blockchain platform
Announcing that TON was being shut down, Durov wrote:
I wish to conclude this submit by wishing luck to all these striving for decentralization, stability and equality on the earth. You are combating the best battle. This battle might be an important battle of our era. We hope that you just succeed the place now we have failed.
In its personal announcement of the settlement, the SEC differed with Durov’s evaluation of its actions.
“New and modern companies are welcome to take part in our capital markets however they can not accomplish that in violation of the registration necessities of the federal securities legal guidelines,” mentioned Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, in an announcement. “This settlement requires Telegram to return funds to traders, imposes a major penalty, and requires Telegram to provide discover of future digital choices.”
The argument from the regulator is that Telegram didn’t comply with the principles. Had it labored with the regulator as an alternative of launching the token providing with none oversight, the result may need been completely different, in line with the SEC.
“Our emergency motion protected retail traders from Telegram’s try to flood the markets with securities bought in an unregistered providing with out offering full disclosures regarding their mission,” mentioned Lara Shalov Mehraban, affiliate regional director of the New York Regional Office. “The treatments we obtained present important reduction to traders and shield retail traders from future unlawful choices by Telegram.”