26 June 2020

Telegram agrees to $18.5 million settlement with the SEC over ‘unlawful’ token sale

Accord to a recent court filing, Telegram has agreed to pay the U.S. Securities and Exchange Commission (SEC) $18.5 million over its $1.7 billion "unlawful" token sale. As part of the agreement, Telegram must also notify the SEC should it choose to issue another cryptocurrency within the next three years. The settlement effectively ends the months-long legal battle between the two parties, which began when the SEC sued Telegram back in Oct. 2019 to prevent the distribution of GRAMs. Telegram now has "30 days to pay the SEC penalty and up to four years to pay back investors."

See the full list of regulatory actions within crypto in our handy resource page.

Why it matters: - Telegram has already abandoned the TON project. Therefore, the settlement will not have an immediate effect on Telegram's development initiatives. While the official TON chain is inactive, community developers and validators launched a fork of TON (called Free TON) last month. - As we've previously covered, this case and settlement could have more significant implications for other SAFT raises, especially for those projects that have yet to launch. As for future SAFTS, Nic Carter of Castle Island Ventures pointed out that TON's demise has likely shut the window of opportunity for SAFTs and other token sales. These heightened regulatory concerns could be one reason projects are turning to more innovative token distribution strategies, such as UMA's Initial Uniswap Listing or liquidity incentives (aka yield farming).

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