Telegram Quits Court Fight With SEC Over TON Blockchain Project

Randolph French

ByRandolph French

May 25, 2020

Telegram has thrown in the towel in its court battle against the U.S. Securities and Exchange Commission (SEC) and will no longer be fighting the ban on its blockchain token project.
In a filing on Friday (see bottom), the messaging app provider said it was withdrawing its appeal over a previous court decision that backed the SEC in prohibiting the issuance of “gram” tokens to investors both in and out of the U.S.
The new document filed with the U.S. Court of Appeals for the Second Circuit states: “The parties in the above-referenced case have filed a stipulation withdrawing this appeal pursuant to Local Rule 42.1.”
The rule means that the parties have filed an agreement for dismissal of the case without prejudice. As such, the case is over for now, but not necessarily forever.
Telegram raise $1.7 billion in a private token sale in early 2018 to develop a blockchain named the Telegram Open Network, or TON. The project was halted by the SEC for violating U.S. securities law in October, weeks before its scheduled launch.
After six months of written arguments from both sides and one hearing in the Southern District court of New York, Judge Kevin Castel supported the initial preliminary injunction barring Telegram from issuing tokens to investors, on March 24. Telegram moved immediately to appeal, but that effort died with Friday’s filing.
On May 12, Telegram’s CEO Pavel Durov announced in a blog post that Telegram would no longer be developing TON. The post marked Durov’s first ever public statement about the project, which was being developed largely in secret.
Gram investors have now been given two options: either take back 72% of their investment in TON, according to the previously agreed contract amendment; or to loan the money to Telegram for one year, with a promise to get 110% in April 2021. U.S. investors have been given only the first option.
Some investors told CoinDesk they had already received their refunds, while others said they had taken the loan route. However, a number have been unhappy with the outcome and said they are considering suing Telegram. No filed lawsuit has been made public so far.
The TON project may not be completely dead, however. Earlier this month, a group of professional validators launched a forked version of the blockchain, named Free TON, with the technical support of TON Labs, a startup that previously helped Telegram with the project.
See the full court filing below:
Disclosure Read More The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Randolph French

By Randolph French

I have been writing about Cryptocurrency for over 5 years and I have seen it grow from a niche interest to a global phenomenon. I have written two books on the subject, “Crypto investing for beginners” and “Crypto trading for beginners”. My work has been featured in major publications such as Forbes, Wall Street Journal and Time Magazine. I am a thought leader in the space and my insights are highly sought after by both media and industry players. I am a regular contributor to CNBC, Bloomberg and CoinDesk. I also advise startups in the space and have mentored many successful entrepreneurs.

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