Telegram to Pay $18.5M Civil Penalty in SEC Settlement after TON Project Abondonment

Telegram’s long-going battle with the SEC hasn’t ended on a positive note for the crypto community. Last week, after eight months of court cases, Telegram decided to pull-the-plug and abandon its much ambitious TON project. Now, the SEC wants to make sure that there is a path of no-return for Telegram. In a court filing by the SEC on Thursday, June 25, the U.S. SEC has appealed a final judgment on the terminating the Telegram Open Network (TON) project. As per the proposed filing, the SEC will send all the funds received to the U.S. Treasury after the favorable judgment.

The filing shows that the SEC wants the New York Southern District Court to ask Telegram to pay million-dollar-penalties to several defendants related to the case. “Defendants are jointly and severally liable for disgorgement of $1,224,000,000,” wrote the SEC.

Note that the proposed judgment is not yet final at this stage. Out of the total $1.2 billion disgorgements, $1.19 billion is the amount paid by the defendants as termination amounts. Post the entry of the proposed judgment, the defendants will get 30 days to make the payments. Under the settlement, Telegram will have 30 days to pay the SEC and four years to pay back the investors.

In case the defendants fail to send this payment, SEC will further move for civil contempt. In the court filing, the SEC wrote:

“By making payments of the Termination Amounts (as that term is defined in Section 1.1 of the “Purchase Agreements for grams”), or of the disgorgement and civil penalty amounts to the Commission, Defendants relinquish all legal and equitable right, title, and interest in such funds and no part of the funds shall be returned to Defendants.”

SEC and Telegram Disagreements on TON Project

Apart from the $1.2 billion disgorgements, the SEC wants the Telegram Group to pay $18.5 million for the civil penalty. As per the filing, Telegram has also agreed to pay this amount after the June 11 agreement.

Furthermore, the filing states that Telegram should notify the SEC if in future (next three years ) it wants to issue cryptocurrencies, digital coins, or other digital assets using distributed ledger technology. Also, the notification should arrive 45 days prior to the planned issuance, reads the statement.

Announcing its ambitious TON project in early 2018, Telegram raised $1.7 billion in ICO of its native GRAM tokens. The American investors account for a total of $425 million of this total fundraising.

But last year in October 2019, Telegram was blocked by the SEC before conducting the public sale of its GRAM tokens. After a lot of tussles, the court ruled in favor of the SEC saying that the GRAM tokens were unregistered securities. Telegram CEO Pavel Durov proposed a reimbursement plan thereafter and later he decided to abandon the project.

In a statement to CoinDesk, Pavel Durov said that the settlement “reconfirms our commitment to repay the remaining funds to purchasers”.

“Since we saw limited value in pursuing the court case further, we welcomed the opportunity to resolve it without admitting or denying our liability”, added he.