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 investors had put into its TON digital token.
The settlement ends a month’s long legal battle between the company and the regulator. In October 2019 the SEC filed a complaint towards Telegram alleging the company had raised capital by the sale of 2.9 billion Grams to finance its enterprise. The SEC sought to enjoin Telegram from delivering the Grams it offered, which the regulator alleged have been securities. In March, the U.S. District Court docket 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.
Saying that TON was being shut down, Durov wrote:
I wish to conclude this publish by wishing luck to all these striving for decentralization, steadiness and equality on the earth. You are preventing the proper battle. This battle might be the most important battle of our generation. We hope that you succeed the place we have failed.
In its personal announcement of the settlement, the SEC differed with Durov’s evaluation of its actions.
“New and revolutionary companies are welcome to take part in our capital markets however they can not achieve this 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 buyers, imposes a significant 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 a substitute of launching the token providing with none oversight, the end result may have been totally different, in keeping with the SEC.
“Our emergency motion protected retail investors from Telegram’s attempt to flood the markets with securities offered in an unregistered providing without offering full disclosures regarding their mission,” mentioned Lara Shalov Mehraban, affiliate regional director of the New York Regional Workplace. “The remedies we obtained present significant relief to buyers and defend retail buyers from future unlawful choices by Telegram.”