Telegram To Pay $18.5 Million In Civil Penalty

Pavel Durov, CEO and founder of Telegram, speaks at a conference. Reuters

Messaging app provider Telegram has reached a settlement agreement with the United States Securities and Exchange Commission (SEC), the financial regulator said in a press release on 26 June.

The SEC had filed a proposed final judgement on 25 June, requesting that the New York Southern District Court order Telegram to pay million dollar penalties to multiple defendants related to the case. The proposal also requires Telegram to notify the SEC if it plans to issue any sort of digital currency in the next three years, with the notification arriving at least 45 days before the planned issuance.

On Friday, Judge Kevin Castel signed the final judgement in the case, requiring Telegram to pay back $1.2 billion to its investors who participated in its Telegram Open Network (TON) Initial Coin Offering (ICO). According to the settlement, Telegram will have up to four years to pay back its investors. The firm will also be responsible for a civil penalty of $18.5 million, payments for which should be made within 30 days of signing the final judgement.

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

Telegram’s courtroom saga with the SEC began in October 2019, when the regulator deemed that the firm’s ICO was an unregistered digital token offering. At the time, the regulator filed for an emergency action, and obtained a temporary restraining order, which prevented Telegram from selling and distributing its Gram token in the U.S..

As the project was scheduled to launch in late October, Telegram was forced to delay the release date of TON. At the time, the firm sent a proposal to its investors, saying that they could either agree to delay the launch until 30 April 2020, or get a partial refund of their investment. Last month the firm’s CEO, Pavel Durov, finally threw in the towel, and announced that his company will discontinue its efforts on the blockchain project, and will no longer be involved with TON in any way.

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