Telegram’s Pavel Durov’s plans of running his own cryptocurrency platform are officially shelved now. The U.S. Securities and Exchange Commission, which accused the company of wrongful practices has now succeeded in getting the service disbanded. Additionally, Telegram has been fined $18.5 million to settle this civil dispute, along with $1.2 billion that it has to return to its investors, putting the company in a big conundrum.
The SEC had filed a case against Telegram and its TON cryptocurrency platform, last year, accusing that the company, “failed to register their offers and sales of Grams, which are securities, in violation of the registration provisions of the Securities Act of 1933,” according to SEC’s press release. Telegram had sold approximately 2.9 billion “Grams” or tokens at discounted prices to 171 initial purchasers worldwide, including more than 1 billion Grams to 39 U.S. purchasers. The government entity felt that these customers could flood the U.S. market with billions of Grams after Telegram releases them, suspecting that these Grams were “unlawfully distributed.”
“Our emergency action today is intended to prevent Telegram from flooding the U.S. markets with digital tokens that we allege were unlawfully sold,” Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, had said. “We allege that the defendants have failed to provide investors with information regarding Grams and Telegram’s business operations, financial condition, risk factors, and management that the securities laws require.”
“We have repeatedly stated that issuers cannot avoid the federal securities laws just by labeling their product a cryptocurrency or a digital token,” Steven Peikin, Co-Director of the SEC’s Division of Enforcement. “Telegram seeks to obtain the benefits of a public offering without complying with the long-established disclosure responsibilities designed to protect the investing public.
After months and months of legal battle, Telegram’s TON finally hit the dirt, after the company was forced to abandon the platform in May. Pavel was vocally infuriated by the decision, and said, ” A judge used (his) reasoning to rule that people should not be allowed to buy or sell Grams like they can buy or sell Bitcoins,” a decision that forced Telegram to return the $1.2 billion it had raised from investors for TON.
The U.S. court declared that the decision not only prevaricates the sale of Grams in U.S., but in the whole world, as “U.S. citizens would have found workarounds to access the TON platform.”
“Sadly, the US judge is right about one thing: we, the people outside the US, can vote for our presidents and elect our parliaments, but we are still dependent on the United States when it comes to finance and technology,” he added.
Now, if all that wasn’t enough, Telegram has been levied a fine of $18.5 million, for its “ill practices”. Durov wrote, expressing his grief, ” I want to conclude this post by wishing luck to all those striving for decentralization, balance and equality in the world. You are fighting the right battle. This battle may well be the most important battle of our generation. We hope that you succeed where we have failed.”
SEC has a different perspective, and debates that if TON had consulted the authority instead of willy nilly launching the platform without abiding by the rules, the outcome would have been different.
