Following Thursday’s news that Telegram had agreed to settle the United States Securities and Exchange Commission’s (SEC) case against it regarding its abandoned cryptocurrency project, a judge accepted the terms on Friday.
Now the messaging platform can move on from the federal scrutiny that has haunted it since the SEC filed suit in October 2019, when it claimed that the $1.7 billion raised in an ICO constituted an illegal securities offering.
However, Telegram didn’t get out of the mess without a significant penalty. While Telegram admitted no wrongdoing in the settlement, the company will have to pay an $18.5 million civil penalty to the SEC, as well as alert the agency in advance should it wish to issue any further digital currency in the next three years.
Telegram must also pay back the $1.224 billion to investors that remains unspent from the $1.7 billion that it raised via its initial coin offering (ICO) in 2018. The company has already taken that step with investors, offering to either pay back the remaining percentage now or to keep the amount as a loan and pay back 110% of the original investment one year later.
“Since we saw limited value in pursuing the court case further, we welcomed the opportunity to resolve it without admitting or denying our liability,” CEO Pavel Durov wrote on his personal Telegram channel.
“We look forward to continuing to pursue our other projects and avenues for innovation,” he added, “and we hope the regulatory environment for blockchain technology in the US becomes more favorable for others in the future.”
The rise and fall of TON
Telegram officially abandoned the Telegram Open Network (TON) crypto project on May 12. The company launched the program with its 2018 ICO in an attempt to monetize the messaging platform, which has more than 400 million global users.
Following the SEC’s filing last October, Telegram’s lawyers attempted to defend the ICO by claiming that the company was not selling Gram cryptocurrency, but rather the rights to Grams that would be minted down the line. The SEC apparently didn’t buy that argument.
With the legal woes keeping Telegram from launching the network by April 30, the deadline promised to investors, the company was forced to cancel its plans.
“Regrettably, we were unable to launch the TON platform by our deadline date due to the preliminary injunction ordered by the Court, and thus had to return the remaining funds to purchasers under our contractual agreements,” Durov wrote on his Telegram channel.
Telegram has washed its hands of TON and agreed to the settlement, but the network will continue on via outside contributors. Using Telegram’s open-source code, community organizations such as Free TON, NewTON, and the TON Chinese Community plan to bring the network to life.